Hi,
This is a bug in the portal cost estimator whereby it is not handling this specific case properly. So long as you set License type: Windows client and check "I confirm I have an eligible Windows 10/11 license with multi-tenant hosting rights." on Basics tab it will set the property on the VM so that no license fee (Image) will be charged.
Screenshot of Basics tab when creating VM using image:
Screenshot of created VM -- Settings -- Operating system blade:
You can double-check the above by running the VM for some time, navigate to the VM's resource group and click Cost management -- Cost analysis blade. At top of report click on View -- Smart views -- Services and examine the data at bottom to see charges.
Please note that there is a delay from the time a charge is accrued (VM running in this case) until the charge shows up in Cost analysis. This delay can be several hours, so you may need to check periodically over the course of 4-16 hours or so.
Please click Accept Answer and upvote if the above was helpful.
Thanks.
-TP