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This might not be the "nicest" way for some, but what I usually do is: directly tell her that I am not interested. 

As someone who personally experienced being lead to before, the cruelest thing one could do to a person is giving him/her false hope. Sure she might not get hurt if she's oblivious to your real feelings however over time, those feelings would gradually grow and grow until it would be very hard of her to stop. 

Which is why I personally think that the nicest way to turn down a girl down is just to honestly admit your real feelings to her. Do not lead on any girl and do not give her false hope if you know that you will never reciprocate those feelings.