Hello Megha Goushal
Welcome to Microsoft Q&A Platform, thanks for posting your query here.
If you have already assigned the necessary roles to the local user account and are still unable to log in, you may want to check if the AADLoginForWindows extension is installed on the VM.
If you have verified that the extension is installed and the roles are assigned correctly, you may want to check if the security policy "Network security: Allow PKU2U authentication requests to this computer to use online identities" is enabled on both the server and the client.
Another possible reason is that the "Deny log on locally" policy is applied to the local user accounts. This policy can restrict users from logging in locally or remotely. Verify the local security policy settings on the virtual machine and ensure that the user account you're trying to log in with is not included in any "Deny log on locally" policy.
Group Policy settings may be preventing non-administrative users from logging in remotely. Ensure that there are no restrictive policies applied to the virtual machine's local user accounts or the Remote Desktop Users Group.
Additionally, you may want to check if the local user account is allowed to log in remotely.
Hope these troubleshooting steps will help in resolving your issue.