Changes in soil carbon (C) and nutrients considerably influence soil health and agricultural sustainability. However, how agricultural management affects C and N allocation among various soil organic matter pools and their linkages with soil health are not clear for arid and semi‐arid regions. This study aimed to evaluate the soil profile distribution of selected C and N fractions and associated soil health properties in conventional tillage (CT), no‐tillage (NT), and strip tillage (ST) fields and quantify the relationship of labile and inorganic C and N fractions to soil organic carbon (SOC) sequestration in semi‐arid dryland cropping systems. Crop rotation was a 4‐year cycle of corn (Zea mays L.)—sorghum (Sorghum bicolor L. Moench)—winter wheat (Triticum aestivum L.)—fallow across all tillage systems. Soil samples were collected from 0–20, 20–40, and 40–60 cm depths of each plot in July 2022, after 9 years of plot establishment, and analysed for potentially mineralizable carbon (PMC), microbial biomass carbon (MBC), SOC, soil inorganic (SIC), soil total carbon (STC), soil inorganic nitrogen (SIN), total labile nitrogen (TLN), total organic nitrogen (SON), and labile organic nitrogen (LON) and other soil health indicators. The results indicate that PMC was 31% more and LON was 23% more in NT than in CT, whilst ST resulted in lower pH and had only 10%, 9%, and 24% more SON, STN, and LON, respectively, than CT in 0–60 cm profile. The SIC stock was negatively correlated with MBC, PMC, SON, STN, LON, TLN, and SIN, whilst positively correlated with depth, STC, and pH. After 9 years of conservation tillage, whilst depth‐wise distribution varied among tillage systems, soil C sequestration rate was negative in the 0–60 cm profile under both NT and ST compared with CT, mainly owing to more SIC accumulation in deeper depth of conventional system. These results show the complexity of soil C and N allocation under different tillage systems, with NT and ST supporting greater C and N storage in the surface soil and CT supporting more C and N storage in the deeper depth. Soil biological activity indicators appear to drive surface SOC accumulation, whilst soil pH and N availability influenced SIC accumulation in lower depths.