iCloud saying number of free iCloud is exceed on my iPhone?

This happens when a) you try to log into Settings>iCloud (or Apple ID on Catalina) using an Apple ID which has not yet created an iCloud account, and b) the device you are doing this on has already been used to create three iCloud accounts. That three is the limit; after that you can't create any more iCloud accounts whatever you do - it's tied to the hardware, not the account, and deleting accounts from it won't make any difference.

Note that an Apple ID, though it may have been used to purchase items from iTunes and to log in here, doesn't have an associated iCloud account until you specifically create one by logging in in Settings (or System Preferences)>iCloud (or Apple ID on Catalina).

What you can do is to create a new iCloud account on another iOS device or Mac (not Windows or Android). Once you've done that you can log in to that account on the first device without problems.