In a bowl whisk together the yogurt, lemon juice and water to thin yogurt. You want this to have a loose consistency, but not watery (it needs to cling to the onions). Stir through the cumin, salt and sugar. Let sit while you slice onion.
Use a sharp knife or mandolin and thinly slice the red onion into rings. You'll need 1 cup total, save remaining onion for other use. Rinse onion in sieve under cold water (this helps remove sharpness, optional).
Remove seeds from red chili. Slice into thin strips and then dice. Chop the mint leaves.
Transfer the onions, red chili and mint to the yogurt mixture and stir to mix thoroughly.
Serve immediately with a sprinkle of red chili powder or chaat masala on top, or chill, covered, for 30 minutes for flavors to develop (optional).