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Aim: Shifting cultivation is a widespread land‐use in many tropical countries that also harbours significant levels of biodiversity. Increasing frequency of cultivation cycles and expansion into old‐growth forests have intensified the impacts of shifting cultivation on biodiversity and carbon sequestration. We assessed how bird diversity responds to shifting cultivation and the potential for co‐benefits for both biodiversity and carbon in such landscapes to inform carbon‐based payments for ecosystem service (PES) schemes. Location: Nagaland, Northeast India. Methods: We surveyed above‐ground carbon stocks and bird communities across various stages of a shifting cultivation system and old‐growth forest using composite carbon sampling plots and repeated point counts directly overlaying the carbon plots in both summer and winter. We assessed species diversity using species accumulation and rarefaction curves based on Hill numbers. We fitted a linear mixed‐effect model to assess the relationship between species richness and fallow age. We also examined possible co‐benefits between carbon and biodiversity from fallow regeneration in terms of relative community similarity to old‐growth forest across carbons stocks. Results: Farmland and secondary forests regenerating on fallowed land had similar bird species richness to old‐growth forests in summer and relatively higher species richness in winter. Within regenerating fallows, we did not find any strong evidence that fallow age influenced bird species richness. Bird community resemblance to old‐growth forest increased with secondary forest maturity, correlating also with carbon stocks in summer. However, bird community assemblage did not show a strong association with habitat types and carbon stocks during winter. Main conclusions: This study underscores the important role of traditional non‐intensive shifting cultivation in providing refuges for biodiversity within heterogeneous habitat mosaics. Effectively managing these landscapes is crucial for both biodiversity conservation and carbon sequestration in the subtropics. [ABSTRACT FROM AUTHOR]