How to transfer data to iCloud

there is no transfer, you either sync or back up data to icloud, that data will still remain on your phone storage.

That still won't help with your internal memory, you will need to delete stuff to gain back memory.

Read here How to check the storage on your iPhone, iPad, and iPod touch - Apple Support

Is there any way to keep photos only on cloud and not on the phone ? Or to be placed on the phone as thumbnails and when requested the picture should be downloaded ?

You will need to download google photos, once it syncs all your photo album, you can then delete it off our phone.