There is generally a misunderstanding of the concept of transcendence and immanence in Hinduism which is reflected in its practices quite extensively. Some people assert that Hinduism is not a religion because it exalts “created” (i.e., world) to the position of God or that it makes God out of everything. While generally Abrahamic faiths emphasize Transcendence, whereas Hinduism emphasizes both Transcendence and Immanence.
Transcendence in religion means going beyond or something completely outside this world while Immanence recognizes the concept of Divine within (this Universe). In transcendence, God is thought as something beyond this universe while in Immanence which says that God permeates everything. Transcendence of the God in Hinduism is established by stories of वामन (vAmana), and Immanence is established by story of प्रह्लाद (prahlAda).
Pantheism however says that the material world i.e., the visible world is identical with God. What is the difference then between Immanence and Pantheism? Perhaps an example will clarify this better: A fish within the water will have water all around it and within it too; Water within that fish is Immanence while water outside the body of fish is transcendence. Thus, Pantheism is a subset of the super-set called Immanence
Where is the scriptural proof प्रमाण (pramANa) for this Transcendence & Immanence of God? Let us go to Purusha Sukta. The first rk says: सहस्रशीर्षा पुरुषः सहस्राक्षः सहस्रपात् ।स भूमिं विश्वतो वृत्वात्यतिष्ठद्दशाङुलम् ॥१॥ (sahasraSiRSa puruSah, sahasrAksha sahasrapat; sa bhUmim vishvato vrtva atya tishTha dazAngulam) – thousand head, thousand eyes and thousand legged Being covered/enveloped/permeated this universe and extended 10 fingers beyond it. (Read thousand as infinite). Thus in the first Rk itself Veda establishes the Transcendence and Immanence of God. The Veda continues: एतावानस्य महिमातो ज्यायाँश्च पूरुषः ।पादोऽस्य विश्वा भूतानि त्रिपादस्यामृतं दिवि ॥३॥ (etAvan asya maHima ato jyayag~mzaca pUruSah; pAdo asya vizva bhUtani tripAdasyAm amrtam divi) – All this is His glory (i.e., the manifest world). But He is greater than this entire visible world. A quarter of Him is the manifest Universe while three-quarters of Him rests in divine immortality.
How is this philosophy reflected in the religious lives of ordinary Hindus? When “Superstitious Hindus” turn every stone, every tree, every animal or humans (Saints, Sufis etc), it is not they are acting out of “ignorance” or “superstition”; It is they recognize the immanence & transcendence of God within. When they perform “avAhan” (invitation/invocation) ceremony before every worship they invite the transcendent Brahman to appear as immanent Brahman to receive the worship in the idol they revere. Puja done, the Brahman/God is requested to revert himself to the Universal Transcendent Being that He is. The object/idol of worship afterwards becomes profane again. This is reflected in the joyful visarjan processions every year after Ganesha chaturthi or Durga puja