The correct answer is A. The spring balance reading will increase.
When the iron piece is suspended into the water, it displaces some of the water. This means that the water pressure on the bottom of the bucket decreases. The spring balance measures the force of the water pressure on the bottom of the bucket, so the reading will increase.
The depth of immersion does not affect the answer, as long as the iron piece does not touch the sides of the bucket. If the iron piece touches the sides of the bucket, it will create a force that pushes against the bucket. This force will be added to the force of the water pressure, and the spring balance reading will increase even more.