In the semi-arid plains of Southern India, outside the protected area network, sacred groves forests and the barren lands invaded by Prosopis juliflora are reckoned to be the major greenery, but have homogenous and heterogeneous vegetation respectively. This study attempted to compare 50 Sacred Groves Stands (SGS) and 50 monodominant Prosopis juliflora Stands (PJS) for the functional diversity, evenness, floral diversity, carbon stock and dynamics, carbon-fixing traits, dendrochronology of trees, soil nutrient profiles, and soil erosion. Quadrat sample survey was adopted to record stand density, species richness, abundance, basal area and leaf area index; composite soil samples were collected at depths 0–30 cm for nutrient profiling (N, P, K, and OC). Photosynthesis rate (µmole co2 m2/sec), air temperature (°c), leaf intracellular co2 concentration (ppm), ambient photosynthetic active radiation (µmole m2/sec), transpiration rate (m. mole H2O m2/sec) were determined for the 51 tree species existed in SGS and PJS using Plant Photosynthesis system. Structural Equation Model (SEM) was applied to derive the carbon sequestering potential and photosynthetic efficiency of eight dominant tree species using vital input parameters, including eco-physiological, morphological, and biochemical characterization. The Revised Universal Soil Loss Equation (RUSLE) model, in conjunction with ArcGIS Pro and ArcGIS 10.3, was adopted to map soil loss. Carbon source/sink determinations inferred through Net Ecosystem Productivity (NEP) assessments showed that mature SGS potentially acted as a carbon sink (0.06 ± 0.01 g C/m2/day), while matured PJS acted as a carbon source (−0.34 ± 0.12 g C/m2/day). Soil erosion rates were significantly greater (29.5 ± 13.4 ton/ha/year) in SGS compared to PJS (7.52 ± 2.55 ton/ha/year). Of the eight selected tree species, SEM revealed that trees belonging to the family Fabaceae [Wrightia tinctoria (estimated coefficient: 1.28, p = 0.02) > Prosopis juliflora (1.22, p = 0.01) > Acacia nilotica (1.21, p = 0.03) > Albizia lebbeck (0.97, p = 0.01)] showed comparatively high carbon sequestering ability.