In response to the degraded soil health and lack of improvement in the yield of rice–wheat cropping systems in South Asia’s Indo-Gangetic Plains, an experiment was formulated in a split-plot design. Four rice residue management practices were the primary factor, alongside two nitrogen levels (150 and 180 kg/ha) and two nitrogen split levels (two and three splits) as sub-treatments. The findings revealed a notable increase in soil organic carbon (SOC), microbial count, and enzymatic activity in plots subjected to conservation tillage and residue treatment compared to those in plots subjected to partial residue (anchored stubbles) and conventional methods (residue incorporated with chopping). The collective analysis demonstrated a significant influence of rice residue management practices and nitrogen application levels on wheat yield attributes and productivity. Specifically, zero tillage with full residue (unchopped) in wheat exhibited a 5.23% increase in grain yield compared to conventional tillage with full residue (chopped), concurrently boosting the soil microbial count by 19.80–25%, the diazotrophic count by 29.43–31.6%, and the actinomycete count by 20.15–32.99% compared with conventional tillage. Moreover, applying nitrogen in three splits (at sowing, before the 1st irrigation, and after the 1st irrigation) led to a 6.25% increase in grain yield than that in two splits (at sowing and after the 1st irrigation), significantly impacting wheat productivity in the soil. Furthermore, the zero tillage-happy seeder with full residue elevated dehydrogenase activity from 77.94 to 88.32 μg TPF/g soil/24 h during the study year, surpassing that in the conventional plot. This increase in enzymatic activity was paralleled by a robust positive correlation between the microbial population and enzymatic activity across various residue retention practices. In conclusion, the results underscore the efficacy of crop residue retention following conservation tillage, in tandem with nitrogen optimization and scheduling, in enhancing wheat yield within the rice–wheat cropping system.