In the context of Indian history, the principle of 'Dyarchy (diarchy)' refers to

(a) Division of the central legislature into two houses.
(b) Introduction of double government i.e., Central and State governments.
(c) Having two sets of rulers; one in London and another in Delhi.
(d) Division of the subjects delegated to the provinces into two categories. ✓ UPSC's answer

Why the answer is (d)

• Dyarchy, introduced in the provinces by the Government of India Act, 1919 (Montagu–Chelmsford Reforms), divided provincial subjects into 'reserved' (law and order, finance, land revenue — under the Governor and his councillors) and 'transferred' (education, health, local government — under Indian ministers responsible to the legislature) — option (d).

• It was abolished in the provinces by the 1935 Act, which introduced it at the Centre instead (never operated).

• Bicameralism (a), federal double government (b) and London–Delhi rule (c) are different concepts.

• Hence option (d).

Why the other options are wrong

(a) Division of the central legislature into two houses.: Two houses is bicameralism, not dyarchy.
(b) Introduction of double government i.e., Central and State governments.: Centre–State division is federalism, not dyarchy.
(c) Having two sets of rulers; one in London and another in Delhi.: Dyarchy is not about London and Delhi.

Asked in the GS Paper I of the UPSC Civil Services Preliminary Examination 2017, held on 18 June 2017. Question and answer key: Union Public Service Commission. Explanation: UPSC Answer Check.