Singh was arrested along with four Pakistanis in Spain's eastern town of Mislata for allegedly forging passports and other documents for al Qaeda, the sources said.
The accused are being produced before a court in Madrid after which the Spanish authorities will give details, they said.
Media reports, quoting a police spokeswoman in Valencia province, earlier said four Indians and one Pakistani were arrested in Mislata as part of an ongoing operation.
Sources in New Delhi, quoting the Indian embassy in Spain, said only one of the arrested persons was Indian while four others were Pakistanis.
Media outlets had earlier reported that at least 10 more people were arrested in the northeastern city of Barcelona.
Police in Madrid had said that the operation was in progress and so could not divulge more details.
