"We found her bullet riddled body near Madrassa on the outskirts of Sharan city (the provincial capital) this morning," provincial police chief Dawlat Khan Zadran told AFP, confirming earlier reports from Indian media.
Ms Banerjee, 49, was a fairly well-known writer whose book "Kabuliwala's Bengali Wife", about her dramatic escape from the Taliban was made into a Bollywood film in 2003.
Police on Thursday said that the book may have been the reason militants targeted her, saying they had spoken with her husband.
"Our investigation ... indicates that the militants had grievances against her for something she had written or told in the past, which was then turned into a film," the provincial police chief said.
She was married to Afghan businessman Jaanbaz Khan and had recently moved back to live with him in the insurgency-hit Paktika province, reportedly to run a health clinic there.
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