MOHALLA ASSI is the story of a man with principles forced to make compromises. Dharmnath Pandey (Sunny Deol) is a priest who sits on Assi Ghat in the holy city of Varanasi. He attends to the pilgrims during the day and teaches Sanskrit in the afternoon. The income is meagre and unlike others, he doesn't compel his visitors to pay him exorbitantly.
This causes lot of distress to his wife Savitri (Sakshi Tanwar) and she's forever cursing him for not earning enough. But Pandey feels that there's no end to a man's greed and that one should be happy with what he/she earns. He's also a firm protector of the values of Assi and would not tolerate any 'corruption'. A lot of other Pandas like him also reside in Assi which gives a clear view of river Ganga.
As a result, foreign tourists insist on renting a room in this locality. But Pandey not only refuses to allot a room to any tourist in his house but doesn't even allow others Brahmin Pandas do so. His neighbour and fellow panda Upadhyay ji (Saurabh Shukla) is hence always cross with him on this aspect. Besides Dharmnath Pandey, the film consists of subplots comprising of a tourist guide Kanni Guru (Ravi Kishan) who's ready to do anything to earn more money and Nekram (Faisal Rashid), a barber who falls for a tourist, Kathryn (Alisha).
Lastly, the film also focuses on a group of men, comprising of right-winger politician Radhe Shyam (Mukesh Tiwari), Tanni Guru (Akhilendra Mishra), Gaya Singh (Mithilesh Chaturvedi), lawyer Srivastava (Rajendra Gupta), communist sympathizer S P Mishra etc â€“ who meet at Pappu's tea shop and discuss about politics, religion and how foreigners are trying to pollute Varanasi.