Seventh Schedule in the Indian Constitution is concerned with :

Concept: Article 246 of the Constitution empowers Parliament and State Legislatures to make laws on subjects listed in the Seventh Schedule. The Seventh Schedule sets out three lists — the Union List (subjects only Parliament can legislate on), the State List (subjects only State Legislatures can legislate on), and the Concurrent List (subjects both can legislate on) — and this is how legislative powers are divided between the Centre and the States.

Application: The question asks what the Seventh Schedule deals with. Since the Seventh Schedule exists precisely to allocate subjects of legislation between the Union and the States through its three lists, "Distribution of powers between the Centre and State governments" is exactly what it is concerned with.

Cross-check (why the other Parts/Schedules do not fit):

• Fundamental Rights are guaranteed in Part III (Articles 12–35) of the Constitution — a separate Part, not the Seventh Schedule.

• Fundamental Duties are listed under Article 51-A in Part IV-A, added by the 42nd Amendment — again a distinct Part, unrelated to the Seventh Schedule.

• Panchayati Raj institutions are dealt with in Part IX (added by the 73rd Amendment) and detailed further in the Eleventh Schedule, a different Schedule from the Seventh.

Since only the Union–State–Concurrent List framework is housed in the Seventh Schedule, the distribution of powers between the Centre and the States is confirmed as the correct match.