I want to include on-premise Virtual Machine into Azure Active Directory. I don't have much idea how to implement this. Kindly let me know the steps to perform this.
Unfortunately you go the "wrong" direction from Microsoft's perspective. Integrating OnPremises Users to SP Online works like a charm. The way back is much more complicated.
You need to configure a TrustedIdentityTokenIssuer (TST) in SharePoint. This will make SharePoint trust another source for identities in addition to OnPremises ActiveDirectory.
- Set up OnPremises ADFS and add it as an Application in Azure AD
- Add Azure AD as an Identity Provider in ADFS
- Create Relying Party in SharePoint and Add Pass Thru Rule
- Create SPTrustedIdentityTokenIssuer in SharePoint
The whole process is described here in detail (skip step 1 in the blog as you want to enable AAD-Only users): Using Azure AD as an Identity Provider with ADFS for SharePoint 2013
Integrating a TST into SharePoint comes with a lot of drawbacks and more complexity. Link is for FormsBasedAuthentication (FBA), but those drawbacks also apply to a TST. So test this scenario excessive and then decide if it is really the answer to your needs.