India beat Afghanistan in thrilling encounter
The semifinals on the Army ground on Sunday headed straight to the tie-breaker after 90 minutes failed to separate the two teams.
Each side was given five penalties, but the Afghans missed the net twice and a result India won by 4-3.
Afghanistan have previously tied two group matches against Pakistan and the hosts Nepal.
The final will be played on Tuesday between India and Nepal, who have defeated Bangladesh in the semifianls.
Senior footballer Hadi Kazmi said India were an experienced side but they were given a tough time by the Afghans who were first time taking part in the tournament.
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