Download data from tally database to sql server

Yes, it is possible, please refer the below link.
http://www.rtslink.com/dx-fusion/
If you want to create your own, then try the below one.
Create a simple .net application which send SOAP request to tally.
Once you got the response XML parse it and send it to sql server.

Tally supports ODBC connection also. 
So you can try with either ODBC or SOAP request. 
BTW, where is your tally version?
 
http://social.msdn.microsoft.com/Forums/en-US/0224666c-252c-44b5-963a-1b0b015cf327/how-to-export-from-tally

http://td9.tallysolutions.com/vbulletin/forum/integration-with-tally-erp-9/software-integration/1018-export-pdf-using-xml-soap-request-using-vb6



http://mirror1.tallysolutions.com/Downloads/TDL%20Developer/Tally.ERP%209%20-%20Integration%20Capabilities.pdf