(Inputs from Bhagavatam as explained by Srila Prabhupad)
Like everyone believes that Lord Vishnu punished Bali Maharaja and sent him to hell, it is contradicting to what has actually been written in the scriptures.
Lord Vamanadeva appeared in this world as the son of Kashyapa and Aditi, completely equipped with conchshell, disc, club and lotus. It was none other Lord Vishnu who appeared on Śravaṇa-dvādaśī when the Abhijit star had arisen.
After His appearance, the Lord assumed the form of a dwarf (Vamana). All the great sages expressed their jubilation, and with Kashyapa Muni before them they performed the birthday ceremony of Lord Vāmana.
At the sacred thread ceremony of Vāmanadeva, the sun-god personally uttered the Gāyatrī mantra, Bṛhaspati offered the sacred thread, and Kashyapa Muni offered a straw belt. When Vāmanadeva had thus been given the sacred thread, Kuvera, King of the Yakṣas, gave Him a pot for begging alms, and mother Bhagavatī, the wife of Lord Śiva and most chaste mother of the entire universe, gave Him His first alms.
When the Lord heard that Bali Mahārāja was performing aśvamedha sacrifices under the patronage of brāhmaṇas belonging to the Bhṛgu dynasty, the Supreme Lord, who is full in every respect, proceeded there to show His mercy to Bali Mahārāja. By His weight, He pushed down the earth with every step.
His brilliant effulgence diminished the brilliance of all the priests and their disciples, who thus stood from their seats and welcomed the Lord properly by offering obeisances.
Bali Mahārāja, jubilant at seeing Lord Vāmanadeva, whose beautiful limbs contributed equally to the beauty of His entire body, offered Him a seat with great satisfaction. The Beauty of the Liberated Souls was thereupon with words of welcome worshiped by Bali Mahârâja who honored Him by washing His feet.
The water washing from His feet washes away the sins of all people. Bali knew the dharma and placed on his head the all-auspicious water that also by the god of gods, Lord Shiva who is marked with the emblem of the moon, in his supreme devotion was accepted on his head.’
Lord Vāmanadeva wanted three paces of land according to the measurement of His footsteps. He did not want more than necessary. But although He pretended to be an ordinary human child, He actually wanted the land comprising the upper, middle and lower planetary systems. This was just to show the prowess of the Supreme Personality of Godhead. Although Bali Mahārāja was a devotee, he was attached to material possessions, and therefore the Lord, being very kind to him, showed him special favor by appearing as Lord Vāmana to take away all his material possessions, and his mind as well.
When Bali Mahārāja, thinking Vāmanadeva to be the son of a brāhmaṇa, told Him to ask for anything He liked, Lord Vāmanadeva praised Hiraṇyakaśipu and Hiraṇyākṣa for their heroic activities, and after thus praising the family in which Bali Mahārāja had been born, He begged the King for three paces of land. Bali Mahārāja agreed to give this land in charity, since this was very insignificant, but Śukrācārya, who could understand that Vāmanadeva was Viṣṇu, the friend of the demigods, forbade Bali Mahārāja to give this land. Śukrācārya advised Bali Mahārāja to withdraw his promise. He explained that in subduing others, in joking, in responding to danger, in acting for the welfare of others, and so on, one could refuse to fulfill one’s promise, and there would be no fault. By this philosophy, Śukrācārya tried to dissuade Bali Mahārāja from giving land to Lord Vāmanadeva.
Bali Mahārāja might argue that he had promised only three steps of land. But Śukrācārya, being a very learned brāhmaṇa, immediately understood that this was a plan of Hari, who had falsely appeared there as a brahmacharī.
Bali Mahārāja thought it improper to withdraw his promise to the brahmacārī. Bali Mahārāja thought that even if this brahmacārī, Vāmanadeva, were Lord Viṣṇu, if the Lord accepted his charity and then again arrested him, Bali Mahārāja would not envy Him. Considering all these points, Bali Mahārāja finally gave in charity everything he possessed.
Lord Vāmanadeva then immediately extended Himself into a universal body. By the mercy of Lord Vāmanadeva, Bali Mahārāja could see that the Lord is all-pervading and that everything rests in His body. Bali Mahārāja could see Lord Vāmanadeva as the supreme Viṣṇu, wearing a helmet, yellow garments, the mark of Śrīvatsa, the Kaustubha jewel, a flower garland, and ornaments decorating His entire body. The Lord gradually covered the entire surface of the world, and by extending His body He covered the entire sky. With His hands He covered all directions, and with His second footstep He covered the entire upper planetary system. Therefore there was no vacant place where He could take His third footstep.
When Bali Mahārāja was thus reduced to a helpless position, Lord Viṣṇu asked him for the third step of land. In Bali Mahārāja’s dynasty there were many asuras who because of their enmity toward Viṣṇu had achieved a destination more exalted than that of many mystic yogīs. Bali Mahārāja specifically remembered the determination of Prahlāda Mahārāja in devotional service. Considering all these points, he decided to give his head in charity as the place for Viṣṇu’s third step.
The Supreme Personality of Godhead was pleased by the behavior of Bali Mahārāja. Thus the Lord placed him on the planet Sutala, and there, after bestowing benedictions upon him, the Lord agreed to become his doorman.
The great soul Bali Mahārāja experienced that the highest gain in life is to attain devotional service under the shelter of the Lord’s lotus feet in full surrender. Being fixed in this conclusion, his heart full of ecstatic devotion and his eyes full of tears, he offered obeisances to the Personality of Godhead and then, with his associates, entered the planet Sutala.
