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We are considering Jira for our organization. However, one of our main concerns is for Jira to store data only in our internal SharePoint/Microsoft365 system and not on any external websites/servers. Is that a possibility?
Welcome to the Atlassian Community!
Jira does not store data in remote services. Jira data lives in the database underlying the software, and it keeps attachments on a local disk (which is not shared).
If you want to keep your data inside your own systems, that's not a problem, you just need to be running a Jira Data Center installation on your own hardware. If you're using Jira Cloud, you don't have a say over where the data is kept (beyond the regional data centre you can pin the data to - Frankfurt, Dublin, Singapore, etc) You can't host Jira data in Sharepoint or Office - they're simply not built to be remote file stores.