The tie-breaker ended in a 4-4 draw, forcing the game to be decided in sudden death.
Both teams scored from their first sudden death penalty shots.
In the second sudden death penalty Apparao Chiman's shot was blocked by Punjab goalie Paramjit Singh, while Sandeep Singh ensured his team's maiden entry into the last four with a deft placement.
Earlier in the regulation both teams were evenly matched and the game ended in a goalless draw.
In the first match of the day, Bhutan XI sent packing Tibetan National Football Academy (TNFA) packing out of the tournament with a convincing 3-0 victory.
Bhutan XI captain Wangdi Dorji scored a brace in the 37th and 60th minute after his teammate Gyaltshen gave the lead in 27th minute.
Bhutan XI would now face Three Star, Nepal for a berth in the semis.