With increasing air pollution, exposure to air pollutants is becoming a critical health and environmental issue all over the world. In case of India, due to significant differences in the economic status and energy consumption characteristics, substantial variation in the air pollutant emissions is observed across Indian states in urban and rural areas. This study aims at developing a residential sector model to project CO₂ emissions up to 2070, leading India’s progress towards carbon-neutrality, and evaluating the dual benefits of reducing the aforesaid emissions. A bottom-up optimization model is used to analyze these emission projections for greenhouse gases (GHGs) and air pollutants across Indian states in rural and urban areas. Further, to evaluate the effects of Indian government policy, various mitigation scenarios are analyzed, which capture the energy transition and direct and indirect emissions in India’s slow, medium, and fast-developing states. Rapid energy transition in India doubles the total energy consumption in the business-as-usual (BAU) scenario from 2010 to 2070. Consumption of traditional biomass and coal energy sources dramatically falls, and advanced energy sources such as liquefied petroleum gas (LPG) and electricity are adopted. Energy transitions help decrease the vulnerability to harmful direct air pollutants such as black carbon (BC), organic carbon (OC) and particulate matter (PM) among rural households. There are serious tradeoffs, however, as increased usage of LPG and electricity may raise total CO₂, SO₂, and NO_X emissions. Higher LPG consumption leads to a more than two-fold increase in CO₂ emissions by 2070, compared to 2020 in residential sector. By pursuing carbon-neutrality through a renewable electricity transition, the most ambitious scenario in this study, India could reduce CO₂, SO₂, NO_X, and BC emissions by 67%, 87%, 89%, and 99%, respectively, from the 2070 BAU levels.