Since your buying decision hinges on the rear seat, we will eliminate options that miss out on adjustable rear seat headrests, which are critical for safety. Sadly, versions of the otherwise likeable Hyundai i20 IVT and Tata Altroz AMT within your budget make do with fixed headrests only, and hence have not been considered. 

Your best options among hatchbacks include the Maruti Suzuki Baleno AGS Alpha and the slightly pricier Toyota Glanza AGS V. The sister models (both are made by Maruti) score well for seat comfort, ride comfort and rear legroom. 

Rear headroom, though, could be an issue for taller occupants. Performance in town is pleasant and decent enough for highway use, so long as you adopt an easygoing driving style. The AGS (AMT gearbox) isn't suited to sporty driving, just in case that's important to you. 

Between the two, the differences inside are down to the Glanza's use of lighter colours that help make the cabin seem airier. 
  

All three options on your shortlist are nice to drive in their own ways. The Maruti Suzuki Baleno is very comfortable at city speeds with excellent bump absorption and a peppy engine. Tata's Altroz feels the toughest of the three cars and drives with a big car feel out on the highway. The Citroen C3 has a nice engine, and it also balances ride and comfort very well. 

However, for reliability and ease of service, the Baleno is your best bet. The Baleno is known to be a trouble-free car, and Maruti's vast network means you are never far from a service centre. Service costs are also competitive. 

The Toyota Glanza is essentially a rebadged version of the Baleno, but does cost more for similarly-specced variants. We'd recommend sticking to the Baleno. Within Rs 7 lakh, you'll get the Sigma variant, though we'd recommend upping your budget a bit (and bargaining hard with your dealer!) to get the higher-spec Delta trim. 

It packs in extras such as a powered mirror adjust as well as a 7-inch touchscreen infotainment system that would add greatly to your experience.   

The Maruti Suzuki Baleno or even its sister car, the Toyota Glanza, would be a good option to buy. The car is spacious with comfy seats, and it is fuel-efficient too, both the manual and the automatic version (AMT). 

In our standard test cycle, we got 13.80kpl and 17.50kpl in our city and highway cycles for the manual, whereas the automated manual transmission (AMT) achieved 11.86kpl and 17.21kpl.  

The Baleno sits below 4 meters in length and is compact enough for the city. However, if you would like something smaller, consider the Hyundai Exter. It won't be as efficient, in the manual we got 9kpl and 14kpl for city and highway runs, but this is still good. Also, you will also benefit from a slightly higher seating position and a lower price.    

The new Hyundai Venue is a good option to consider. It is an easy-to-drive SUV with good visibility, a light steering, and a buttery-smooth 5-speed manual gearbox and clutch. The 1.2-litre petrol engine is very refined and smooth, and has adequate performance for city use. 

You could also consider a Maruti Baleno or Toyota Glanza. These are very user-friendly hatchback options in that price range.

Almost all cars today are equipped with basic safety features like ESP, along with ABS with EBD. It helps prevent an accident in the first place, and these also have 6 airbags to protect the occupants in case of a collision. 

Hence, as far as safety features go, most cars have you covered. That said, if you're looking for an automatic vehicle with an excellent 5-star BNCAP crash test rating within your budget, the Maruti Dzire AMT is the one to go for. 

The engine is smooth and refined, and even the AMT (automatic) is relatively smoother than many other options at this price. The cabin is spacious and comfortable, and it drives well on the highway, too. 

Alternatively, you could consider the Maruti Baleno or Toyota Glanza, both of which are 4-star BNCAP-rated vehicles.

The Toyota Glanza is a rebadged Maruti Suzuki Baleno, and the only difference between the two is the badge, some interior trim colours and the warranty. The Glanza is sold with a 3-year/1,00,000km warranty, while the Baleno gets a 2-year/40,000km warranty.

The Glanza is a good option if you like the way it looks, and the UV cut glass is a must-have feature for you. However, if you are looking for a car that will hold its value better, then the Maruti Suzuki Baleno is the better option, and also features UV cut class.

The Tata Altroz does get you the option of a diesel engine, and a DCT automatic, which is the more sophisticated auto gearbox here. However, you could also consider the new Hyundai i20, which comes with a CVT auto or a DCT with its powerful turbo engine.