Banerjee's body was riddled with more than 20 bullets, allegedly by Taliban gunmen who attacked her Thursday in Paktika province, Britain's Daily Telegraph reported, quoting local police. Some of her hair had been torn from her head, a police official said.
Banerjee, a Calcutta resident who had moved to Afghanistan in 1989 after marrying an Afghan businessman, had recently returned to be with her husband.
The Hindustan Times quoted police as saying Taliban gunmen arrived at her home in the provincial capital Sharana, tied up her husband and other family members, took Banerjee out and gunned her down. A senior police official was quoted as saying Banerjee, also known as Sayed Kamala, had been working as a health worker in the province.
In her 1995 memoir, "A Kabuliwala's Bengali Wife," Banerjee described her 1994 escape from the Taliban and the book was made into an Indian movie in 2003. She had met her husband in Calcutta and, prior to her escape, she had been running a health clinic, which the Taliban had ordered her to close.
The Telegraph said Banerjee's killing is the latest in a series of attacks on prominent women in Afghanistan, including high-profile politicians and police officers, some of whom had been similarly murdered.
In her book, Banerjee had noted life in Afghanistan was tolerable in the beginning but after a Taliban crackdown in 2003, she was not allowed to operate the clinic.
"Her body was dumped at a madrassa with some of her hair ripped out," Paktika police chief was quoted as saying. "It seems the killers were angry with the book and the film."
The New York Times said Banerjee's death came 18 years after the Taliban sentenced her to death for refusing to wear a burqa in public.
In India, she was still known by her Hindu name of Sushmita Banerjee.
In her book, she had described her marriage to Jaanbaz Khan, an Afghan Muslim, over the objections of her Hindu parents.
The Times said after the Taliban regime was overthrown, she traveled between Afghanistan and India. An Afghan resident was quoted as saying he had heard from close family members that the Taliban had been looking for her.
The Times said both local and national Taliban spokesmen denied responsibility for her death, saying they do not execute people without a trial and blamed enemy propaganda.
No other group had claimed responsibility for the attack on Banerjee, CNN reported.