Lead-free double perovskites (LFDPs), as environmentally sustainable alternatives to lead-based perovskites, have attracted growing attention for a wide range of optoelectronic applications. Among various strategies, doping has emerged as a powerful approach to tune and enhance their optical properties. However, realizing their practical potential requires a comprehensive understanding of their photophysical behavior. Here, we investigate Bi3+/Ho3+ co-doped Cs2AgInCl6 nanocrystals, comprising 1% Bi3+ and variable Ho3+ content (referred to as Ho3+-doped CABIC), which are direct-bandgap double perovskite nanocrystals (DPNCs). These nanocrystals exhibit dual visible and near-infrared (NIR) emission, combined with excellent thermal and moisture stability. Efficient energy transfer from self-trapped excitons (STEs) in the host lattice to Ho3+ ions plays a central role in enabling strong dual visible–NIR emission. Femtosecond transient absorption spectroscopy revealed a transfer time of 95 ps, highlighting a fast and effective sensitization pathway. Notably, in this efficiently luminescent sample, THz spectroscopy revealed reduced photoconductivity and carrier mobility, attributed to a higher effective mass and the presence of Ho 4f states near the conduction band minimum, as supported by DFT calculations. Beyond fundamental insights, the multifunctionality of Ho3+-doped CABIC is demonstrated through its application in optical thermometry and phosphor-converted light-emitting diodes (pc-LEDs). A maximum relative temperature sensitivity of 0.76% K−1 is achieved, outperforming many conventional thermometric materials. Furthermore, the fabricated pc-LED exhibited warm orange-yellow light with CIE coordinates of (0.48, 0.46) together with efficient NIR emission. These findings position Ho3+-doped CABIC nanocrystals as promising candidates for next-generation eco-friendly lighting and photonic technologies.