JOIN USThe soldier, who is in his early 20s, initially told investigators that he unsheathed his khukri - the symbolic weapon of the Gurkhas - after running out of ammunition, army sources said.
But later the Taliban fighter was mutilated so his identity could be verified through DNA tests.
"The soldier has been removed from duty and flown home. There is no sense of glory involved here, more a sense of shame. He should not have done what he did," the source said.
The incident took place earlier this month when the Private, from 1st Battalion, Royal Gurkha Rifles, was involved in a fierce firefight with insurgents in the Babaji area of Afghanistan's Helmand province, Daily Mail reported Sunday.
His unit had been told that they were seeking a "high value target", a Taliban commander, and that they must prove they had killed the right man.
The Gurkhas tried to take the Taliban leader's body away from the battlefield. But they came under heavy fire as they tried to do so.
Military sources said that in the heat of battle, the Gurkha took out his curved khukri knife and beheaded the dead insurgent.
He is understood to have removed the man's head from the area, leaving the rest of his body on the battlefield.
This is considered a gross insult to the Muslims of Afghanistan, who bury the entire body of their dead even if parts have to be retrieved.
British soldiers often return missing body parts once a battle has ended so the dead can be buried in one piece.
A Ministry of Defence spokesman said: "We are aware of an incident and have informed the Afghan authorities. An investigation is underway and it would not be appropriate to comment further until this is concluded."