I use TFS for a long time as a source control repository for my code, and it's very useful in versioning the code.
Can TFS be utilized as complete bug tracking system with time logging and issue managements functionality? And if yes How to use TFS as bug tracking system to keep, track and categorize the bugs among the team members?
If it's not suitable, what are the alternatives? It's so important to be easy to use interface.
TFS is one of the most versatile and capable ALM tools on the market and fully supports bug tracking and traceability though the code that was changes.
https://www.visualstudio.com/get-started/work/create-your-backlog-vs
The out of the box bug work item is specifically designed to work with the test tools and the planning tools. If you are not using them you might need to add a few customization to compensate. The best way is to use it out of the box and add what your need.