The Varnas, which are the four broad social classes in ancient India, gradually evolved into hereditary castes during the Later Vedic period. This period was a phase of transition between the Early Vedic period and the classical age in ancient India. During the Early Vedic period, society was primarily divided into four Varnas based on occupation: Brahmins (priests and scholars), Kshatriyas (warriors and rulers), Vaishyas (merchants and farmers), and Shudras (laborers and servants). However, as time progressed, this system became rigid and hereditary.

The Later Vedic period, which is estimated to be around 1000 BCE to 600 BCE, witnessed various social, economic, and political changes, leading to the emergence of the caste system. The factors contributing to the transformation of Varnas into hereditary castes include the increasing importance of birth and lineage, the establishment of strict rules regarding intermarriage and occupational restrictions, and the development of social and economic inequalities. Over time, these hereditary castes became closed and rigid social groups, governing individuals` social status, occupation, and opportunities.

Therefore, option 1, the Later Vedic period, is the correct answer as it accurately identifies