In or over?

[Over the top]

...rain drops that are falling in [city]

Is it "in" or "over"

Also can I say rain drops that are falling in [city] thunder storm?

[Grumpy]

You could use either of them, as well as "on".
For your second question, the idea would normally be expressed as something like"...rain drops that are falling from a thunderstorm over [city]" or "..rain drops that are falling in/on [city] from a thunderstorm".

[probus]

We normally treat rain as an uncountable noun, rather than mentioning the individual drops.

Rain is falling in (city) is simple, natural and good.

Even more common would be:

It's raining in (city).