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Hi Rakhee,
If your headset is plugged in but not working in Windows 365, please try the following steps:
Check the headset connection: Unplug and reconnect your headset, or try another USB port if you're using a USB headset.
Select the correct audio device: Go to Settings > System > Sound and select your headset under both Output (speakers) and Input (microphone).
Test the microphone: Under Settings > System > Sound > Input, select your headset microphone and click Start test to check whether Windows detects your voice.
Check microphone permissions: Go to Settings > Privacy & security > Microphone and enable Microphone access and Let desktop apps access your microphone.
If you're using a Windows 365 Cloud PC: Check that microphone and audio redirection are enabled for your remote connection, then disconnect and reconnect to the Cloud PC.
You can also refer to Microsoft's official guide: Fix sound or audio problems in Windows