Hi there. I have some experience with AGs, but I tend to use Powershell and manual scripting because the wizard can be quite.... oversimplified. I'll take your questions in order --
1) I can't see Basic Availability Group option in Create New Availability Wizard, I can only see the drop down for Cluster Type is Windows Server Failover Cluster and Check box for Database LevelHealth Detection and Per Database DTC Support
-- I'm not quite sure which part of the wizard you're referring to. The first step is to name the AG. After that, if there are no databases available to add to the AG, the wizard will just ask you to specify AG partner replica server names. If you could provide more detail here, that would be most helpful.
2)Another issue is I can't select the Primary DB as status shows Password Required and when i am trying to click on, getting this message:This DB is Encrypted by Master Key, You need to provide valid password when adding it to the availability group.
-- Yep, this is where the wizard kind of falls down. For my AG instances, I export the db encryption certificate to a file and import it to the other AG replicas before creating the AG. I tend to also export the service master key from the "primary" replica and import it to the other replicas. This can prevent issues stemming from encryption and AG fail-overs.
3) Do I need to create same USer DB in Secondary Server before i set up AlwaysON and configure availability group?
-- Create? No. You will need to take a FULL backup of your database on the primary and a TLOG backup of this same db before attempting to restore both of those backups (in order) to the replica. On the replica, leave the database in the "recovery" state. This will set it up to start synchronization.
4) Do i have to take FULL and Transaction log backup again just right before creating availability group?
-- Not necessarily. The key question to ask yourself when restoring to the replica is 1) was there any activity since I restored the backups to the replica, and 2) were there any automated TLOG backup jobs run on the primary since I restored the backups to the AG replica? If not, the AG replication should be ok with synchronizing the databases from the last TLOG restore.