Religion in India has always played a big role. But in those days it was not taken in narrow sense of the term. The aim of the religion was to promote dharma. It meant the promotion of righteousness and justice. It also meant growth of virtue. It was not a very complex system. Both during Harrapan valley and early Rigveda it was a simple affair. There were no temples, no ostentatious ceremonies or rituals. The people worshipped in open. There was worship of nature. There was no priestly class as such.
Ancient India's religion can be traced right from the Harappan Civilization that grew up in two cities of Harrappa and Mohenjo-Daro in approximately 2500 B.C.E. Harrappan Civilization was characterized by religious sexual imagery. Two coinciding iconographic systems were developed in the Indus Valley. There were phallic images associated with animals and animal-man combinations. Contrastingly, mother goddess icons have been found in homes and distinct from the masculine images, which occur on small plates. It seemed that people worshipped mother goddess with great reverence. The citizens of Harrappa and Mohenjo-Daro also clung to a rigid dualism of purity and pollution. They were among the first civilizations to establish a functioning system of sewage and plumbing and they also placed community baths in prominent locations in their cities. The various concerns of the Indus Valley Civilization would come to find new homes in the later religious systems that would dominate Indian thought until the coming of the Muslims in the 11th century of the Common Era.
Hinduism developed as first among India's non-indigenous religious systems by the Indo-Aryan people who moved south through India and displaced the Indus Valley Civilization. Hinduism is based upon three primary texts: the Vedas (written 1400-1000 B.C.E.), the Upanishads (written 900-500 B.C.E.) and the Mahabharata (400 B.C.E. to 400 C.E.). The most ancient sacred literature of Hinduism is called the Vedas. This collection of hymns, poems, and ceremonial formulas represented the beliefs of several Aryan tribes. Initially the Vedas were considered so sacred that they were only transmitted orally from one generation of Brahmans to the next. The passages of the Vedas were eventually written in Sanskrit near the end of the third century BC, and consist of four collections called the Rig-Veda, the Sama-Veda, the Yajur-Veda, and the Atharva-Veda. Collectively, these are referred to as the Samhitas.
The first three Samhitas were used in the Vedic period by the priestly class as ritual handbooks. Containing 1,028 poetic hymns, the Rig-Veda was used by the hotri who called on the gods by reciting the hymns aloud. The hymns vary in style and length, and praise a pantheon of gods. Although Indra, the god of war and weather, is the most frequently mentioned, there appears to be no hierarchy. Agni, the god of fire, is the second most prominently mentioned deity. The Sama-Veda consisted of various portions taken from the Rig-Veda and were utilized by the udgatri chanters. The adhvaryu priests used the Yajur-Vedas. This work contains specific sacrificial formulas, which were recited during that form of ceremony. The final Veda, the Atharva-Veda, is attributed to a sage, or rishi, named Atharvan, and consists of a number of hymns and magical incantations. The Brahmans too adopted it as a ritual handbook after reservations. Although the Rig-Veda is still considered the most important of these ancient texts, it was still never very popular. Much of this comes from the fact of its composition by and for a religious aristocracy. In contrast, the Atharva-Veda, compiled perhaps as late as 500 BC, frequently refers to many lesser functional gods considered useful in the daily lives and simple rituals of the ordinary Aryan that did not need the mediation of priests.
The Aryans introduced two dynamic social systems: the Varna system or the caste system, and the ashram system based upon age. The Varna system has its origins in the conquering Indo-Aryan tribes, who tried to push the indigenous people or Dravidians into servitude during the latter half of the second millennium B.C.E. and the first half of the first millennium. Although the Vedas spoke of four varnas: Brahmans, Ksatriyas, Vaisyas, and Sudras, the actualization of the Hindu social system provided for only two major classifications: Brahman and non-Brahman. It is from this distinction that a conflict arose between the priestly teachers (Brahmans) and political leaders/warriors (Ksatriyas). In ancient times, social mobility existed and an individual could move from one Varna to another, though with some difficulty. By the time the Brahmanas were created in later Vedic age the Varna system or caste was developed and fully incorporated in the society. There emerged many other occupational groups apart from the regular four varnas. The progressive expansion of the Aryans by war as well as peace increased detribalization, intermarriages and interdependence led to the origin of Jati-caste system. In other words various subgroups within one caste started emerging. Hence at this point Jati or caste had started playing very important role in the social organization. Rigid forms of pollution and purity came into existence so much so that a king while dealing with a case was expected to ask the person his caste.
The second social system was the Asrama system that clearly defined the roles and responsibilities of people. This system envisaged that Individuals start out as students, become householders, give up their homes to be hermits, and finally give up all worldly concerns to become ascetics. This system reflected the tendency of the human psyche to go from learning to raising a family to retiring from civic duties and family matters to finally seeking a release from everything they've seen and done through a spiritual revelation.
In the course of time all societies became riddled with inequalities and the oppressive customs that divided the society further and made the life of the women oppressive. The whole worship system began to grow complex and complicated. Many rituals developed around religion, which were beyond the reach of common people. The respect of the rishis and sages becme unprecedented. The confining system gave rise to two other distinct groups within Indian history: the Jains and the Buddhists, both of whom spoke out against the inequality of Hindu social theory. Jainism, founded by Parsva in 800 B.C.E and spread by Mahavira around 550 B.C.E. rigidly defined some aspects of Hinduism and shed others. The Varna system was maintained by the Jain laypeople, but with the exception of the Brahman caste. Naturally, the Brahmans, being the priests of the Hindu system, generally had little interest in Jainism, a religion primarily of the Ksatriyas and Vaisyas. It emphasized strict adherence to the principle of ahimsa (non-violence) to the exclusion of all else. Jains believed that karma has a physical existence in the form of material gathered on one's soul with every action one takes, good or bad. Jainism was widely accepted among merchants and warriors, but dislike by agriculturists because they necessarily killed animals when raising crops.
At close to the same time as Mahavira, Siddhartha Gautama or Gautam Buddha a royal prince founded a new religion out of Hinduism. He based his religion and his new social system on four noble truths: (1) the existence of suffering, (2) the origin of suffering (desire), (3) the cessation of suffering (elimination of desire), and (4) the path to the cessation of suffering (an eightfold way of right behavior and thought).
Within this new ideology, the Varna system was completely disregarded; the Buddha believed a man to have established himself as a "Brahman" by being a wise and good man, not by being born of the proper family. He declared Vedic sacrifice to be wasteful and cruel (to other life forms) and advocated that people instead sacrifice their hatred and avarice-to shed them. Finally, he declared that a government should be established based upon a common will, public need, and reason. To a proper Buddhist, government is a social contract, not a tacit understanding. Siddhartha, believed that the leader should be chosen because he is the most handsome, favored, intelligent, and capable. The leader should possess the virtues of justice (to rule with happiness and equality), morality (to be a good example), and wisdom (to seek good advisors).
The Buddha established sangha, or Buddhist monastery. At first, only those were admitted who had attained nirvana, then new adherents were allowed, and finally, he gave equal authority to all monks. In this way, the sangha evolved from a monarchy to an oligarchy to a democracy. In principle, the sangha was to be governed by the law of dharma, not by man, a spirit of equality, and unanimity in decision-making. The existence of the sangha was based upon the desire for nirvana, not for a better material situation.
Women in Buddhist communities were given the same accord and respect as men. They were considered equally intelligent and capable. The Buddha vehemently opposed prostitution and so attempted to convert temple prostitutes to his new religion. In spite of the theoretical equality of all people, however, the male-establishment had difficulty in accepting women as full equals. In the course of time Buddhism spread to other parts of world in South-east Asia in Japan, SriLanka etc but lost its influence in India.
As the time passed with that religion began to become a burden. The medieval period saw the advent of Islam, which forced Hinduism to revitalize itself through modifications and rejecting of some of the rituals and traditions.
Hinduism developed as first among India's non-indigenous religious systems by the Indo-Aryan people who moved south through India and displaced the Indus Valley Civilization. Hinduism is based upon three primary texts: the Vedas (written 1400-1000 B.C.E.), the Upanishads (written 900-500 B.C.E.) and the Mahabharata (400 B.C.E. to 400 C.E.). The most ancient sacred literature of Hinduism is called the Vedas. This collection of hymns, poems, and ceremonial formulas represented the beliefs of several Aryan tribes. Initially the Vedas were considered so sacred that they were only transmitted orally from one generation of Brahmans to the next. The passages of the Vedas were eventually written in Sanskrit near the end of the third century BC, and consist of four collections called the Rig-Veda, the Sama-Veda, the Yajur-Veda, and the Atharva-Veda. Collectively, these are referred to as the Samhitas. 
In the course of time all societies became riddled with inequalities and the oppressive customs that divided the society further and made the life of the women oppressive. The whole worship system began to grow complex and complicated. Many rituals developed around religion, which were beyond the reach of common people. The respect of the rishis and sages becme unprecedented. The confining system gave rise to two other distinct groups within Indian history: the Jains and the Buddhists, both of whom spoke out against the inequality of Hindu social theory. Jainism, founded by Parsva in 800 B.C.E and spread by Mahavira around 550 B.C.E. rigidly defined some aspects of Hinduism and shed others. The Varna system was maintained by the Jain laypeople, but with the exception of the Brahman caste. Naturally, the Brahmans, being the priests of the Hindu system, generally had little interest in Jainism, a religion primarily of the Ksatriyas and Vaisyas. It emphasized strict adherence to the principle of ahimsa (non-violence) to the exclusion of all else. Jains believed that karma has a physical existence in the form of material gathered on one's soul with every action one takes, good or bad. Jainism was widely accepted among merchants and warriors, but dislike by agriculturists because they necessarily killed animals when raising crops.
Within this new ideology, the Varna system was completely disregarded; the Buddha believed a man to have established himself as a "Brahman" by being a wise and good man, not by being born of the proper family. He declared Vedic sacrifice to be wasteful and cruel (to other life forms) and advocated that people instead sacrifice their hatred and avarice-to shed them. Finally, he declared that a government should be established based upon a common will, public need, and reason. To a proper Buddhist, government is a social contract, not a tacit understanding. Siddhartha, believed that the leader should be chosen because he is the most handsome, favored, intelligent, and capable. The leader should possess the virtues of justice (to rule with happiness and equality), morality (to be a good example), and wisdom (to seek good advisors).