Varna is a Sanskrit term varṇa (वर्ण) is derived from the root vṛ, meaning "to cover, to envelop" (compare vṛtra). Derived meanings include "kind, sort, character, quality". Contemporary students of Hindu society understand Varna as an ancient fourfold arrangement of socioeconomic categories called the varnas, which is traced back to an oral tradition preserved in the Rigveda (dating perhaps from between 1500 and 1200 bce). In this tradition four varnas are recognised: Brahmins (priestly or scholarly caste), Kṣatriya (martial or royal caste), Vaiśyas (merchant caste) and Sūdras (labor caste).
Varna is not to be confused with the jāti. Varna is roughly similar to western class system of middle, aristocrat, business and working classes and is an artificial/intellectual classification of society while jāti along with kula is a more natural classification and is roughly or exactly the same as clan/tribe/kinship similar to what is followed in most central Asian, middle eastern, African, south east Asian cultures and perhaps in the west as well until modern age and still in some parts.
The Portuguese term caste was adopted during the British times to represent ones social status based on their jati and varna as over the years the varna was being applied to refer to a people/jati rather than an individual due to restriction on social mobility due to various reasons including large influx of foreigners and alien conquests etc. with rare exceptions of individual or clan status changing.
Also people who could not assimilate into the mainstream society were outcast as they were not accounted in the system later known as harijans or more recently dalits. These were mostly nomads, hunter gatherer tribes, refugees, anti-social/dacoit tribes and socially and lawfully ostracised peoples during a certain age or time but eventually never were given a chance to assimilate back into the mainstream after adopting a more mainstream lifestyle perhaps due to continuous strife, conquests and uncertainty over a 1000 years, until recently during the modern age under the British and free Indian Governments, that they are being attempted to assimilate again into the mainstream.
Etymology and origins
All the derived meanings of the term Varna - "kind, sort, character, quality" - are already present in the Rigveda's use of the word. The earliest application to the formal division into four social classes appears in the late Rigvedic Purusha Sukta (RV 10.90.11–12), which has the Brahman, Rajanya (= Kshatriya), Vaishya and Shudra classes emerging from the mouth, arms, thighs and feet of the cosmic being, Purusha, respectively. It seems very probable that in the Chhandas period there were four distinct communities in India with different functions to serve in the body-politic, however, the innumerable sub-sects among the four castes are certainly of very late origin. Also, it can be inferred that the barrier between castes was not impassable during this period for deserving cases, as can be seen from the example of Vishvamitra
The sage Vishvamitra was born as a Kshatriya and by deep tapas (meditation) became Brahmin rishi. This quadruple division into Varnas is not to be confused with Jāti or even the much finer division of the contemporary caste system in India.
Adi Shankara does not admit the reality of the world and therefore the real creation of anything, including the creation of castes. He interprets the Brihadaranyaka Upanishad to only mean that the Viraj only projects the four castes and does not really create them. This implies that individuals belonging to any varna do not have any real reality, but only an empirical or behavioural reality that enables them carry out their dharmas (duties) in this world.
The story of Satyakarma in the Chhandogya Upanishad shows that Varna does not depend on birth rather it depends on gunas. Satyakarma wanted to become a brahmacarin but from his conversation with his mother he could not trace his family roots. He went to Gautama and said he wanted to become a brahmacarin but was not sure to which family he belonged. To this Gautama replied, only a true Brahmin would not swerve from the truth and was ready to initiate Satyakarma.
Basham suggests that the jati system in its modern form developed very late. Hsuan Tsang, the Chinese scholar, in the seventh century was not aware of the jati system. The author Subhash Kak has asserted that the emergence of the modern jati system might be credited to historical events in the Indian polity that occurred with the invasions of the Turks. The varna system as described in the various Puranas, Manusmriti and Dharmashastra was relied upon by the British colonial administrators and scholars. The modern Hindu caste system recognizes many more social groupings not mentioned in the Hindu scriptures and only theoretically accepts the necessity of following prescribed duties.
The Tantric movement that developed as a tradition distinct from orthodox Hinduism between the 8th and 11th centuries CE relaxed many societal strictures regarding class and community distinction but did not deny all social restrictions. N. N. Bhattacharyya notes that "Tantra according to its very nature has nothing to do with the [class] system but in the later Tantras [class] elements are pronounced" because its treatises were written by Brahmanas even though its teachers were often non-Brahamanas.
One might argue that Hinduism is a belief system wedded to the idea that a well ordered society is composed of four castes. Against this the jāti system is a phenomenon that is not restricted to Hindu sections of Indian society. It has been argued that the approving use of the term “Brahmin” in Buddhist and Jain texts shows that even these socially critical movements were comfortable with a caste structured society as long as obligations and privileges accorded to the various castes were justly distributed (cf. Dhammapada ch. XXVI; cf. Sūtrakṛtānga I.xii.11-21). Caste is also not philosophically important to many schools that are conventionally understood under the heading of “Hindu philosophy.” Some philosophical schools, such as Yoga, seem to be implicitly critical of life in conventional society guided by the values of social and ecological domination, while other schools, such as Advaita Vedānta, are openly critical of the idea that caste morality has any relevance to a spiritually serious aspirant.
Varna and jāti
The terms varna (theoretical classification based on occupation) and jāti (caste) are two distinct concepts: while varna is the idealised four-part division envisaged by the above described Twice-Borns, jāti (community) refers to the thousands of actual endogamous groups prevalent across the subcontinent. A jati may be divided into exogamous groups based on same gotras (गोत्र). The classical authors scarcely speak of anything other than the varnas; even Indologists sometimes confuse the two.
Many scholars including Basham believe that the system of jati that we have now emerged only about a thousand years ago. Dumont postulates that the principle of purity-impurity keeps the segments separate from one another and reinforces hierarchy and is unique to the Hindus. According to him, despite the segmented system, each jati closely guards its relative level of purity from contacts which would diminish it such as intermarriage.
Quigley notes that the notion of caste is a very complex one. In recent decades the idealist position, presented by sociologists like Louis Dumont has become the dominant one. According to Quigley:
[The] practitioners of [recent anthropology] cling on to the flotsam of a theory which their own evidence devastatingly undermines. Unable to visualize a general structure of caste which would displace Dumont's theory, they hang on to it unremittingly even though their own evidence shows again and again that this theory simply does not explain what is known about India... The entrenched idea that "Brahmans are the highest caste" has done most to hinder an alternative formulation of how caste systems work.
Rigvedic evidence of such a quadruple division of society has been compared to similar systems, especially with a view to reconstructing hypothetical Proto-Indo-European society. Such comparison is at the basis of the trifunctional hypothesis presented by Georges Dumézil. Dumézil postulates a basic division of society into a priesthood (Brahmins), warrior class or nobility(Kshatriyas) and commoners (Vaishyas), augmented by a class of unfree serfs (Shudras), as was done in ancient Iran and Greece as well (where the fourth class is called pan-Hellenes).
Opposition within Hinduism
Modern critics point that the effect of communities (jatis) inheriting varna was to bind certain communities to sources of influence, power and economy while locking out others and thus create more affluence for jatis in higher classes and severe poverty for jatis in lower classes and the outcaste Dalit. In the last 150 years Indian movements arose to throw off the economic and political yoke of an inherited class system that emerged over time, and replace it with what they believed to be true Varnashrama dharma as described in the Vedas.