The Fifteenth Finance Commission of India used several criteria for horizontal tax devolution. These criteria include the areas of demographic performance, forest and ecology, governance reforms, stable government, and tax and fiscal efforts, as well as population, area, and income distance. However, not all of these factors were used.

Option 1 suggests that only two from the list were used, this is incorrect. Similarly, option 4 that suggests all five were used is also incorrect. The correct answer is option 2, that suggests only three of these were used in addition to population, area, and income distance.

The three criteria that were used are demographic performance, forest and ecology, and tax and fiscal efforts. Governance reforms and stable government were not considered in the Fifteenth Finance Commission`s tax devolution criteria.