Option 1 - The Indian Councils Act of 1892 did not propose the idea of federation. This act primarily aimed at increasing the elected representation of Indians in the legislative councils of British India.

Option 2 - The Morley-Minto Reforms, also known as the Indian Councils Act of 1909, focused on increasing Indian participation in the legislative bodies but did not suggest the concept of federation.

Option 3 - The Montague-Chelmsford Reforms, implemented through the Government of India Act 1919, introduced significant constitutional reforms. While it granted limited self-government to Indians, it did not put forth the idea of federation.

Option 4 - The Nehru Report of 1928, prepared by a committee headed by Jawaharlal Nehru, proposed a dominion status for India within the British Empire. It advocated for a strong central government and provincial autonomy, representing the initial idea of federation in the country.

Therefore, the correct answer is option 4.