In a bowl, combine chicken, yogurt, turmeric powder, red chili powder, and salt. Mix well and let marinate for 15-30 minutes.
Heat vegetable oil in a large pot or pan over medium heat. Add green cardamom pods, cinnamon stick, cloves, and bay leaf. Sauté until fragrant, about 30 seconds.
Add chopped onions and green chili to the pot. Sauté until golden brown and softened, about 8-10 minutes.
Stir in minced ginger and garlic. Cook for 1-2 minutes until aromatic.
Add coriander powder, cumin powder, and the remaining turmeric powder. Cook for 1 minute, stirring constantly. Add a splash of water if needed to prevent burning.
Add puréed tomatoes and sugar (if using). Cook, stirring occasionally, until the oil separates from the masala, about 8-10 minutes.
Add the marinated chicken pieces to the pot. Cook for 5-7 minutes, stirring occasionally, until the chicken is lightly browned on all sides.
Pour in water or chicken broth. Bring to a simmer, then reduce heat to low, cover, and cook for 15-20 minutes, or until chicken is tender and cooked through.
Stir in garam masala and chopped fresh cilantro. Cook for 2-3 minutes more.
Remove from heat and serve hot.
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