@Rohitash0 We have a flexible cancellation policy too. If the guest has already arrived and wants to cancel some or all of their days, it really depends on how far in advance they cancel those days. The check-in time comes into play.
This happened to us. The guest was planning on cancelling (to move to a location closer to the sites he wanted to see) but decided not to after realizing he would not get back his money for two of the three nights. Airbnb Support confirmed we would still get two nights worth of the reservation. Since it was already a couple of hours after check-in, they missed the cancellation deadline (24 hours in advance) for both the first night and second night.
Airbnb doesn't have a cancellation fee, but they'll keep their service fees. When in doubt, ask an Airbnb support rep how it will play out. Whatever you do, don't initiate a cancellation, even if the guest pressures you to do so. Let the guest do the cancellation and let them suffer the consequences.