Can we not query collections inside transactions?

Your understanding is correct. When using the web and mobile SDKs, you have to identify the individual documents that you would like to ensure will not change before your transaction is complete. If those documents come from a collection query ahead of time, fine. But think for a moment about how not-scalable it would be if you had to track every document in a (very large) collection in order to complete your transaction.

However, for backend SDKs, you can perform a query inside a transacction and effectively transact on all the documents that were returned by the query, up to the limit of number of documents in a transaction (500).

You can run queries (not just fetch single documents) in a transaction's get() method, but that's only for server execution. So if you really need to do that (say for maintaining denormalized data's consistency), you can put that code in a cloud function and make use of server-side transactions