@Sai Kiran Maturi Thank you for reaching out.
My understanding is that you are asking if it is possible to add the inbound Security rules in NSG which is associated to the SQL Server instead of adding a Firewall Rules in Azure SQL Server in order to whitelist to access the Database.
Depending on where the connection is originating you have another option:
1.- Use service endpoint if the source/client application is hosted in Azure. Virtual network endpoints and rules for databases - Azure SQL Database | Microsoft Learn
2.- Another option is using Private link. This can be used regardless of if the source/client is on premises or hosted in Azure.
Use virtual network service endpoints and rules for servers in Azure SQL Database
When you use service endpoints for SQL Database, review the following considerations:
- Outbound to Azure SQL Database public IPs is required. Network security groups (NSGs) must be opened to SQL Database IPs to allow connectivity. You can do this by using NSG service tags for SQL Database.
Regards,
Oury