Availability of good quality water for agrarian purposes has become a major issue across the globe. Because of increasing demand from domestic and industrial sectors in most developing countries, irrigation water is becoming a scarce and expensive input for crop production in northwestern India. Cotton (Gossypium hirsutum L.) production through flood irrigation not only wastes precious and limited water available but also leads to nutrient leaching, excessive vegetative growth, and delayed maturity. Drip irrigation coupled with fertigation holds a greater promise, specifically for the Indian state of Punjab, comprising the arid and semiarid zones of northwestern India, where brackish underground water renders it unfit for crop production. Hence, a field experiment was conducted to find a water and nitrogen (N) efficient fertigation treatment for Bt cotton for improving cotton productivity. The experiment was laid out in a complete randomized block design with combinations of three drip irrigation levels (0.6, 0.8, and 1.0 evapotranspiration [ETc]), three N fertigation levels (50%, 75%, and 100% of recommended dose of N [RDN], i.e., 75 kg N ha−1), and an extra absolute control (surface flood irrigation with soil application of RDN). The highest seed cotton yield (SCY) of 2,294 kg ha−1 was recorded with drip irrigation at 0.8 ETc, which was statistically on par with 1.0 ETc but significantly better than 0.6 ETc. Among N fertigation levels, 100% RDN recorded maximum SCY (2,308 kg ha−1), which was on par with 75% RDN but significantly better than 50% RDN. Nitrogen use efficiency (NUE) decreased successively and significantly with increase in fertigation level; however, apparent water productivity (AWP) and water use efficiency (WUE) remained statistically on par between 75% and 100% RDN. WUE was significantly higher under drip irrigation at 0.8 ETc than 0.6 and 1.0 ETc; however, AWP was on par between 0.6 and 0.8 ETc. Combination of drip irrigation at 0.8 ETc and 75% RDN recorded the highest SCY (2,428 kg ha−1). Drip irrigation at 0.8 ETc resulted in 7% higher consumptive use, saving 62.1% more irrigation water than absolute control. Furthermore, the combination of drip irrigation at 0.8 ETc and 75% RDN recorded 31.2%, 22.6%, 74.9%, and 17.8% higher SCY, WUE, NUE, and benefit to cost ratio (B:C) than the absolute control, respectively. Thus, drip irrigation at 0.8 ETc with 75% RDN fertigation was more profitable, more N efficient, and more water efficient that the traditional practice of cotton cultivation in Indian Punjab.