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. 
  

The Maruti Suzuki Baleno 1.2 Petrol Alpha is a good pick for you. It uses a smooth, proven 1.2 litre four cylinder petrol engine, offers good rear seat space, soaks up road undulations well, and returns very good mileage, all of which help keep running and ownership costs low.

It does miss out on a few desirable features, such as a sunroof and ventilated front seats, but it remains a practical, easy to live with hatchback that also delivers excellent fuel efficiency.

Considering your city usage and no mention of any preference for body style between the two, we would suggest going for the Maruti Suzuki Baleno as compared to the Dzire. Both cars are spacious and have a comfortable ride quality and are similar in terms of interior quality. 

But the Baleno has two key advantages. The boot space is more usable thanks to it being a hatchbcak and you can also fold the rear seat for added luggage space, which makes it more practical when you need to carry long items or want extra luggage space. 

The Baleno also uses the older 1.2 litre dual jet four cylinder engine, which is smoother and more powerful than the new 1.2 litre three cylinder engine on the Dzire. If you are looking for an automatic, the AMT gearbox also works better on the Baleno.

As an alternative, you could also consider getting the Maruti Suzuki Fronx. It is slightly more expensive but gives you a more SUV-like stance with better ground clearance and added road presence, while still being easy to drive in the city.

The Honda Amaze ZX CVT is the one we'd recommend for you. It's got the smoother gearbox, which has a big bearing on your overall highway experience. Further, the Amaze also feels more confident at highway speeds. The Amaze doesn't stand out for tech features, but it packs in all the essentials (touchscreen, Android Auto/Apple CarPlay, cruise control, and auto climate control) and more to ensure a comfortable drive. 

A key differentiator on the Amaze is ADAS, which adds a layer of protection, especially on highway drives. Also, Honda's CVT is reliable. In general, the Amaze is a hassle-free car. 

Where the Amaze trails the Maruti Baleno is in fuel economy. The Baleno's AMT ekes out a better real-world economy than the Amaze's CVT. Even so, as a package, the Amaze is the one for you.