India's rich cultural and intellectual heritage has long been anchored in its ancient education system, which emphasized not only the acquisition of knowledge but also the holistic development of individuals. Rooted in the Indian Knowledge System (IKS), this educational model integrated disciplines such as philosophy, science, medicine, mathematics, arts, and spirituality. Institutions like Nalanda, Takshashila, and Vikramshila attracted scholars from across the globe, while the revered Guru-Shishya tradition fostered personalized mentorship, moral values, and lifelong learning. However, in the contemporary era, India's education system has increasingly adopted exam-driven, fragmented models with limited space for indigenous knowledge, leading to concerns regarding the disconnect between education, culture, and holistic development. The primary objectives of this study are to critically analyse the key features of the ancient Indian education system, examine the gaps and challenges in integrating IKS into the present educational framework, and suggest practical ways to incorporate its elements into modern education to enhance quality and inclusiveness. The research follows a descriptive and comparative methodology, utilizing secondary data from historical records, policy documents like NEP-2020, government reports, and contemporary academic studies. The study also reviews literature from both national and international sources to provide a comprehensive understanding of the evolution and relevance of IKS in the current educational landscape. The findings reveal that the ancient education system offered a flexible, interdisciplinary, and values-based curriculum with continuous assessment methods, strong student-teacher relationships, and significant societal participation in promoting education for all. In contrast, the current system faces challenges such as exam-centric learning, limited integration of IKS, weak mentorship structures, and insufficient community involvement. Data shows that only 12% of teacher training programs incorporate IKS, and less than 5% of school curricula explicitly reflect indigenous knowledge. Despite positive policy intentions under NEP-2020, implementation gaps persist, exacerbating issues related to student stress, lack of moral education, and cultural alienation. In conclusion, the research highlights that thoughtfully integrating the ancient Indian education system's strengths within the contemporary framework can significantly enhance the quality, inclusiveness, and cultural relevance of Indian education. Key recommendations include curriculum reforms to embed IKS, teacher training on traditional knowledge systems, reviving mentorship models, and encouraging community and philanthropic engagement. Additionally, reforms in assessment methods inspired by ancient practices can help reduce student stress and promote holistic learning. By bridging the gap between India's educational heritage and modern needs, this approach can create a globally competitive, culturally rooted, and student-centric education system.