Dakhini is spoken in the Deccan plateau region of India. Just as Urdu developed in Lucknow, Dakhini developed in Deccan plateau parallel to Urdu with the mixing of various Indian based languages (like Khari Boli), Arabic and Persian based languages. The term Dakhini is perhaps an umbrella for a group of dialects spoken by certain communities of Muslims in the Deccan region.
Dakhini was the lingua franca of the Muslims of Deccan, chiefly living in Hyderabad state, Mysore state and the Hyderabad–Karnataka Region, covering most of Deccan plateau except for Moplah Muslims of Kerala and the Labbewaar Muslims in Tamil Nadu in the south, to the Beary Bhashe language and Konkani speaking Muslims along the western coast of Karnataka, Goa and Maharashtra. Though, a minor Segment of Kerala Muslims do speak the Dakhini dialect and identify themself as Dakhini Muslims who follows Hanafi Fiqh(Hanafi School of Islamic Jurisprudence).
Dakhni for all practical purposes today is an oral language which is flexible enough to be visually represented by different scripts like Devanagari or Urdu or even Persian. Dakhini was widely spoken across the Deccan plateau peninsula with subtle changes in the dialect as you go down south away from Hyderabad, ending as a heavily Tamilized version around the middle of Tamil Nadu.
Dakhini mainly spoken by the Muslims living in these areas can also be divided into 2 dialects:
North Dakhini - Spoken in areas of Former Hyderabad State: Mainly Hyderabad City, Telangana Region, Marathwada, Hyderabad-Karnataka, Gulbarga, Bidar & Raichur in Present day Karnataka, minority native Goan Konkani Muslims in the Uttara Kannada district of Karnataka with some variation of Nawayath, and Goan Muslim dialect in Goa.
South Dakhini - Spoken along Central Karnataka, Bangalore, North Tamil Nadu, Southern Andhra Pradesh extending up-til Chennai and Nellore in Andhra Pradesh . These were the areas under the Mysore and Carnatic sultanates and a Minor Dakhini Muslim community of Kerala.
North Dakhini is spoken with an added influence of pure Urdu and while South Dakhini draws slightly more influences from Marathi, Kannada and Tamil, it has quite a number of original words not to be found in Urdu or Northern Dakhini, with even a slightly varied grammar and sentence structuring. This particularly points towards possible signs that Dakhini as a language in its own sense could have evolved from the Southern parts much more than the Northern variation.
This tongue is used extensively in the spoken form; when it comes to writing and literary work, standard Urdu is used.