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  1. How to get drop down options using external Data?
  2. How to set up a rule if Column A ( Pens, Books, Sketches) and Column B (Parker,Reynolds,Cello, Text Books,Note Books, Ruled Books ).

When I select Column A - Pens, only (Parker,Reynolds,Cello) should be available as drop down options.

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External data can be made available by using BCS.

For the cascading dropdowns have a look at SPServices

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I saw you put as a keyword Infopath. Your point 2 can be achieved with Infopath easily, see this video which has a guide. If you want other guides, this feature is called "cascading filters". Infopath will still work in SharePoint for some years.

You can also achieve the same by using O365 PowerApps. Here is a guide https://www.itidea.nl/index.php/how-to-create-cascading-drop-downs-using-powerapps/

  • Nice catch. I did not see the reference to infopath. – Nils May 29 at 6:08

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