In late 18th/early 19th century Britain, service in the army was voluntary, and service was often for life. It attracted people with nowhere else to go, leading to the Duke of Wellington's famous comment that the British army was composed of 'the mere scum of the earth.' If this was the model they started from, why did the British prefer high-caste Indians for the Bengal Army? Did they believe better off soldiers would be more motivated and have a stronger morale and unit cohesion? Were they still subject to corporal punishment?
The Duke of Wellingtons peninsula army (and British Armies of the period) were comprised largely of men conned into joining or escaping the Law. A fairly common practise was to have recruiting officers go around towns telling of the 'amazing lives of soldiers' getting young men drunk and making them promise to join. Magistrates often also offered a choice between hard labour or service in the army. This created a body of men who mainly fought for their alcohol ration at the end of the day and were likely to run wild given the opportunity (the comment of Wellington was, if I remember correctly, after his army chose to loot the French Baggage train after Vitoria instead of pursuing and defeating the broken French Army).
In Hindu and Muslim culture, being a warrior was a position of honour in the society. The Hindu Warrior caste was proud and exclusive, and for them joining the Sepoys was merely continuing their caste role. Muslims in India also had strong warrior societies and groups who were also proud to be warriors. Therefore, they wanted to join the army to maintain their status. In India, the army attracted people with prospects and status in society. And as being warriors was deeply ingrained in their Caste/Society, they made excellent soldiers - hence the British Armies willingness to revisit from their ranks.
They were however, still subject to corporal and capital punishment. The Sepoy Mutiny of 1857 was provoked (along with a whole host of underlying issues) with Sepoy Pandey's execution. While he did attack a superior officer and shoot a sergeant, it caused outrage. Another underlying cause of the Mutiny was the poor treatment of proud warriors by British officers, causing the soldiers to feel slighted and offended. The officer corp was drained of capable officers by the EIC (as many had better prospects by joining the company) the remainder were resentful and inept, often brutally treating the soldiers under their command. So corporal punishment was exercised even to the high ranking members of the army (socially not in rank).
An interesting fact is that after 1857, the British recruited far less heavily from the Warrior castes and more from the peasants in Bengal (also reducing the Army massively). This served to reduce the effect of offending the Warrior caste, as well as taking touchy and unreliable troops out of the Army. The reason the Madras and Bombay armies remained loyal was the much higher peasant population in the Army, so far less touchy soldiers. They also had less to lose in many of the changes that put the higher castes on edge (one fear of Hindus was that service overseas could lose Brahmin status to some, another was ostracism from their highly religious and proud castes for using 'unclean' bullet wraps.
Tldr: in England the army was made up of people who mostly didn't want to be their, either as a result of Recruiting sergeant trickery or ultimatums from the law. In India, being Warriors was a source of pride - and the sometimes brutal treatment of warriors was a cause of the Mutiny.