The climatic conditions of North East India are favorable for trees to produce biomass in the form of foliage and twigs that are very rich in essential plant nutrients. Effective recycling of this biomass would help meet the nutritional requirement of crops. Field experiment was conducted in kharif (June–November) seasons for consecutive 3 years (2003, 2004, and 2005) at a lowland farm, subtropical Meghalaya (950 m asl), India, to study the effect of incorporating N-fixing tree biomass (leaves and twigs) on productivity and economics of rice (Oryza sativa L.). Fresh biomass from five tree species including erythrina (Erythrina indica), acacia (Acacia auriculiformis), alder (Alnus nepalensis), tree bean (Parkiaroxburghii), and cassia (Cassia siamea) were applied at a rate of 10 t/ha. A plot with recommended NPK rate (80:60:40 kg/ha) and a control plot were also maintained for comparison. Among the tree species used, the biomass of E. indica was superior in terms of N (3.2%), P (0.47%), K (1.5%), and organic C (18.8%) contents. In the first and second year, productivity of rice was high with recommended NPK rate (4.82 t/ha in 2003 and 5.08 t/ha in 2004) followed by rice with incorporation of E. indica biomass. In the third year of the experiment, effects of tree biomass incorporation on growth, yield and yield attributes surpassed those of the recommended NPK rate, with the exception of A. nepalensis biomass. In that year, the maximum grain yield was recorded under E. indica treatments, exceeding yields under the recommended NPK rate and control by 10.5 and 69.3%, respectively. Incorporation of tree biomass significantly improved (14–19% N and 62–83% P over control) the stocks of soil available N and P. Treatment with A.auriculiformis and E. indica biomass resulted in significantly higher soil organic C content which exceeded that under the recommended NPK rate by 10.3 and 9.2% and that under the control by 15.2 and 14%, respectively higher by species. The highest net return was recorded with the recommended NPK rate ($ 381/ha) followed by E. indica ($ 303/ha). Since the local farmers are resource poor and rarely use chemical fertilizers, application of plant biomass, particularly that of E. indica, to lowland rice is a recommendable option to improve productivity and income, and to sustain soil health.