Toyota Glanza 1.2 petrol E

While there are quite a few petrol automatic options within your Rs 12 lakh budget, the most fuel-efficient options include the 
Maruti Suzuki Baleno AMT (and its twin the Toyota Glanza), Maruti Suzuki Dzire AMT, Maruti Suzuki Swift AMT, Maruti Suzuki Fronx AMT (and its twin the Toyota Taisor).  

All feature AMT gearbox options. While AMTs aren't the most sophisticated or smoothest type of automatic transmission, they are fine for average city driving. What sets AMTs apart from other automatics is real-world fuel economy, which is on par and sometimes even better than a comparable manual's. 

Of the above options, we'd choose between the Baleno, Glanza, Fronx and Taisor. Their larger 1.2-litre four-cylinder engine makes them feel a bit zippier than the Swift and Dzire that use 1.2-litre three-cylinder units. 

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.