The correct answer is option 2, Nagaland. A Union Territory is a region in India that is directly governed by the federal government. It does not have its own state government like the other states in India. In this case, Nagaland is not a Union Territory but a state in northeastern India, with its own elected government.

Option 1, Pondicherry, is a Union Territory. It is now known as Puducherry and is located in the southern part of India.

Option 3, Daman and Diu, is also a Union Territory. It is located in the western part of India and is administered by the federal government.

Option 4, Lakshadweep, is another Union Territory. It is a group of islands located in the Arabian Sea.

Therefore, the incorrect option in this case is option 2, Nagaland.