The company's business in India will remain in operation, managed by local partners, but the brand will adopt a "very safe approach."
Honor CEO Zhao Ming told state-run newspaper Securities Times that Honor formed the India team a few years ago but chose to leave for "obvious reasons", the report said.
In a statement to IANS, a company spokesperson said it "is maintaining business operation in India and will continue its development".
"Honor officially announces its exit from the Indian market" is not correct, the spokesperson added.
The development came as Indian authorities like the Enforcement Directorate (ED) and Directorate of Revenue Intelligence (DRI) have conducted raids and investigations of major Chinese smartphone players like Vivo, OPPO and Xiaomi.
Honor once held a 3 per cent market share in India during its peak in 2018 but fell out after the US put sanctions against Huawei.
Struggling to keep its consumer business afloat in the wake of the US sanctions, Chinese conglomerate Huawei in November sold off its Honor smartphone business assets to China-based Shenzhen Zhixin New Information Technology Co Ltd.
Honor smartphones were hit by US sanctions that prevent Huawei from doing business with the US companies.
Since its creation in 2013, the Honor brand has focused on the youth market by offering phones in the low- to mid-end price range.
In the next seven years, Honor developed into a smartphone brand that shipped over 70 million units annually.
In India, Honor had entered the laptop market and expanded its wearables portfolio in the country.