The suspects were members of the notorious Haqqani militant network, the BBC reported citing the police chief of Paktika province.
"The men were arrested on the basis of intelligence information, and were found in possession of two Kalashnikovs, a motorbike and explosives," provincial police chief Dawlat Khan Zadran told the BBC.
"Both the men are Afghan and from the village where Ms Banerjee lived. They have both confessed to involvement in the killing," Zadran said.
Both the suspects were also accused of planting mines to target the investigation team probing the killing, the report said.
Married to an Afghan businessman, Sushmita Banerjee, 49, was killed outside her home in southeastern Paktika province last Thursday.
She was well-known in India for her memoir, 'A Kabuliwala's Bengali Wife', which recounted her life in Afghanistan with her husband Jaanbaz Khan and her escape from the Taliban.
The book was a bestseller in India and was made into a Bollywood film in 2003 starring Manisha Koirala.
Banerjee, also known as Sayeda Kamala, had recently moved back to Afghanistan from Kolkata to live with her husband who is a businessman.