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Karma yoga (Sanskrit: कर्म योग), or the "discipline of action" is a form of yoga based on the teachings of the Bhagavad Gita, a sacred Sanskrit scripture of Hinduism. Of the four paths to realization, karma yoga is the process of achieving perfection in action. Karma yoga is an intrinsic part of many derivative types of yoga, such as Natya Yoga. Karma yoga is often understood as a yoga of selfless (altruistic) service.
The Bhagavad Gita gives a summary of the karma yoga process. The Gita itself is a chapter from the epic known as Mahabharata, wherein a dialogue takes place between the prince Arjuna, and his friend and chariot driver, Lord Krishna, on the brink of a great dynastic war. Their conversation is prompted by Arjuna as he is engulfed by sorrow and misgivings regarding the oncoming battle in which he has friends and relatives on both sides. In reply, Krishna then elucidates upon a number of philosophical yoga systems and practices (including karma yoga) by/through which he should indeed continue with the fight on righteous principles.
The word karma is derived from the Sanskrit kri, meaning 'to do'. In its most basic sense karma simply means action, and yoga translates to union. Thus karma yoga literally translates to the path of union through action. However, in Vedantic philosophy the word karma means both action and the effects of such action. Karma yoga is described as a way of acting, thinking and willing by which one orients oneself toward realization by acting in accordance with one's duty (dharma) without consideration of personal self-centered desires, likes or dislikes. One acts without being attached to the fruits of one's deeds.
Krishna explains that work done without selfish expectations purifies one's mind and gradually makes an individual fit to see the value of reason. He states that it is not necessary to remain in external solitude, or remain actionless, in order to practice a spiritual life, since the state of action or inaction is primarily determined in the mind.
Quotations from the Gita
In the Bhagavad Gita, Krishna says:
"tasmad asaktah satatam karyam karma samacara asakto hy acaran karmaparam apnoti purushah"
Therefore, without being attached to the fruits of activities, one should act as a matter of duty, for by working without attachment one attains the Supreme.
Krishna then goes on to describe how Arjuna should surrender the fruits of his actions (good or bad) to him, Krishna, (as the Supreme Person or avatar) :
Therefore, O Arjuna, surrendering all your works unto Me, with full knowledge of Me, without desires for profit, with no claims to proprietorship, and free from lethargy, fight.
Another important quotations from the Bhagavad Gita which elucidates karma yoga is "योगः कर्मसु कौशलं॥" (yoga is skill in karma.).
Surrendering action: sattvika vs tamasika tyaga
Any conscious action is motivated by some expectation about the outcome, yet one is to be careful to not let this expectation be selfish in a certain sense. This is accomplished by surrendering ownership of action to Krishna. This surrender is called sAttvika tyAga (to contrast it with tAmasika tyAga or abandoning action itself as Arjuna was about to).
Sattvika tyaga ritual
The Shrivaishnava tradition formalizes this by recommending the chanting of a shlOka prior (also called Sattvika tyaga) to the performance of any such significant karma. This shloka (using ITRANS), with its meaning is given below:
bhagavAn eva svaniyAmya sva-sheSha-bhUtena mayA
sva-ArAdhana-eka-prayojanAya idam <name of the karma>
svasmai svaprItyai svayam eva kArayati.
This translates to:
The auspicious deity, exerting control on himself, using me (his other part) as an instrument, himself effects <name of the karma>, with his pleasure/ worship being the only purpose.
The same shloka may be repeated after the performance of the action, except one replaces kArayati to kArayitavAn to indicate past tense.
The common refrain "सर्वं श्री-कॄष्णार्पणमस्तु॥" is used for the same effect. There is also the following shloka:
कायेन वाचा मनसेंद्रियैर्वा ।
बुद्ध्यात्मना वा प्रकृतिस्वभावात् ।
करोमि यद्यत् सकलं परस्मै ।
नारायणयेति समर्पयामि ॥
which translates to:
Whatever I perform with my body, speech, mind, limbs, intellect or my inner self, either intentionally or unintentionally, I dedicate it to that Supreme Lord Narayana.
As with a number of other philosophies in Hinduism, karma yoga is based on a general understanding of karma and reincarnation (sanskara). It is believed that a man is born with certain tendencies (Sanskaras), both positive and negative, from his previous lives, which push him toward performing certain actions in his present one. This process continues until the individual attains a zero balance (no karma remaining), wherein one achieves liberation.
Schools of thought
Alternative interpretation of Karma (Karm)
Dharm of each human being is to attain Moksh (realize the true nature of Aatma which is Parmaatma). Moksh frees Aatma from cycle of being born in various life forms (Each life form has to go through a cycle of birth - old age - death). Refer to Shrimad Bhagwad Geeta Chapter 2-40, 18-46 to 18-47, 2-41, 4-27. The true Karm is to implement the process of Yagnya. Refer to Shrimad Bhagwad Geeta Chapter 3-8 to 3-9. Anything other than Yagnyarth Karm is bondage of this world - Sansar Bandhan (Anyatra Lokoyam Karm Bandhanah). The Karm is the one that frees us from Ashubh (that is Sansar Bandhan) – Mokshase Ashubhaat Refer to Shrimad Bhagwad Geeta, Chapter 4-16. The process of Yagnya is Yog Sadhana. Refer to Shrimad Bhagwad Geeta, Chapter 5 and 6. Thus, only Yog Sadhana frees us from Sansar Bandhan and helps us to achieve Moksh. Anything else that we do in the world is due to our inner nature based on Tamo Goon, Rajo Goon and Sattva Goon. Anything other than Yog Sadhana generates Kaam (desires), Krodh (anger), Lobh (greed), Mad (Pride), Moh (attachment) and Matsar (jealousy). The goal of Yog Sadhana Karm is to conquer Kaam (desires), Krodh (anger), Lobh (greed), Mad (Pride), Moh (attachment) and Matsar (jealousy) enemies of human being. Yog also means realization of true nature of Aatma that is Parmaatma. 
- Maharishi Mahesh Yogi on the Bhagavad-Gita, a New Translation and Commentary, Chapter 1-6. Penguin Books, 1969, p 131 (v 45), p 144 (v.51), p 149-150 (v.54)
- Chapter 3, Text 19, Bhagavad Gita
- Chapter 3, Text 30, Bhagavad Gita