In a cooking vessel, heat the cooking oil. Add mustard seeds and let them crackle. Add the curry leaves, red chillies, fenugreek seeds, Urad Dal and let them roast for a bit on low flame.
Add turmeric powder, red chilli powder (optional) and the Sambhar powder
Now add the onions and fry them till they are translucent. Add the capsicum and the tomato.
Add a bit of salt now and add some water. Let the ingredients cook in the water on medium flame.
Once the water reduces and the ingredients become a mush, add the tamarind juice, add a bit of salt again, and add the small piece of jaggery. Adding jaggery will balance the salt and the sour taste. Bring it to a boil
Now add the cooked Dal to the mix. Make sure the dal is slightly watery in consistency and not a thick paste. Add half a spoon of salt again
Let the entire mixture come to a boil. You may taste it to see all the spices and salt are ok. You can adjust the salt. Check the consistency of the Sambhar. It is nice to have a saucy, gravy Sambhar as it will go well with Idli. Too thick a Sambhar is not ideal accompaniment for Idli or Dosa.
A note on adding salt: I add salt at every stage so that the ingredients, especially the vegetables, soak in the spices and the salt properly. You may choose to add the salt right at the end as well.