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Abstract In the Indo-Gangetic Plains (IGP), rice–wheat cropping system (RWCS) predominates, producing large quantity of crop residue and its management is major concern. Farmers usually burn the residue to clear the field for succeding crop, and burning damages soil microbes, resulted in loss of soil organic matter. Hence, current study was conducted to assess the impact of different Happy seeder based residue management options on changes in microbial dynamics, enzyme activities and soil organic matter content and also to know that alternative method for attaining sustainable wheat productivity in sandy loam soils of Haryana, India. Results revealed that Zero tillage wheat (ZTW) with partial and full residue retention treatments sown with Happy seeder (after using chopper and spreader), and ZTW with anchored stubbles significantly enhanced soil microbial count by 47.9–60.4%, diazotropic count by 59.0–73.1% and actinomycetes count by 47.3–55.2%, grain yield by 9.8–11.3% and biomass yield by 7.4–9.6% over conventional tilled (CT) residue burning and residue removal plots. ZTW sown with surface retention of rice crop residue increased the organic carbon by 0.36–0.42% and the soil moisture content by 13.4–23.6% over CTW without residue load. Similarly, ZTW sown with Happy seeder with full residue enhanced alkaline phosphatase activity from 95.3 µg TPF g−1 soil 24 h−1 in 2018–2019 to 98.6 µg TPF g−1 soil 24 h−1 in 2019–2020 over control plots. Likely, microbial population and enzymatic activity showed strong positive correlation under variable residue retention practices. However, increased microbial population reduced the soil pH from 7.49 to 7.27 under ZTW with residue retention plots. The wheat yield enhanced by 9.8–11.3% during 2018–2019 and 2019–2020 under ZTW with Happy seeder with full residue load over residue burning and residue removal plots. ZTW sown with Happy seeder under full residue retention, achieved maximum net return 43.16–57.08 × 103 ₹ ha−1) and B-C ratio (1.52 to 1.70) over CTW without residue. Therefore, rice residue needs to be managed by planting wheat using appropriate machinery under ZT for sustaining higher productivity in RWCS and improve soil health and environment under IGP regions.