Diksha won on the 20th hole.
Diksha, who turned 16 earlier this week, will meet Malaysia's favoured Nur Durriah Damian, who beat Ireland's Maria Dunne 1-Up on the 18th hole.
Southpaw Diksha, who is the current leader on the IGU Order of Merit, has been in excellent form this season with some titles and also won the Faldo Series India title in Mumbai to qualify for the Grand Final Asia, which will be held in Vietnam in March, 2017.
The 15-year-old Class 10th student from Delhi-NCR region, has won four of the eight tournaments she has played this season and finished second in two others.
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Her latest win was the Usha Delhi Golf Club Championships last month.
Similarly, Nur has been in great form this season. She has won three big titles, including the Malaysian Ladies Amateur title for the third time in August this year.
At 21, she is more than five years older than the Indian golfer, but both have ample confidence to give their best to become the USHA 100th All India Ladies Amateur champion.
Results: (Semi-finals Matchplay):
Nur Durriah Damian (Mas) bt Maria Dunne (Ire) 1-Up Diksha Dagar bt Tsai Wei Chia (Taipei) 20th hole
Line-up for Final:
Nur Durriah Damian (Mas) vs Diksha Dagar (Ind)
Match starts at 8:20 am.