Groundwater depletion threatens the sustainability of rice-wheat (RW) cropping systems in north-west India. Reducing evapotranspiration (ET), particularly its non-beneficial component soil evaporation (Es), is essential to improve water productivity and limit groundwater decline. This study combines field measurements and APSIM modeling to quantify water balance components and ET partitioning in a dry-seeded RW system in Punjab, India, under conventional and zero tillage (CT, ZT), with and without rice straw mulch. Annual ET losses were high (1,000–1,400 mm), of which 400–500 mm occurred as Es, predominantly during the rice phase, which also dominated deep drainage. Zero tillage was often associated with lower ET but responses varied with crop growth and irrigation differences rather than a consistent tillage effect. Mulch consistently suppressed Es from wheat but had small and inconsistent effects on system-scale ET and transpiration (T). Water productivity with respect to ET and T was generally higher under ZT than CT, reflecting system-dependent management interactions rather than an intrinsic tillage advantage. These findings highlight substantial ET and deep drainage losses in flood-irrigated dry-seeded RW systems and identify rice-phase Es reduction as a key strategy for improving water sustainability.