The rapid development of the Internet and smart devices trigger surge in network traffic making its infrastructure more complex and heterogeneous. The predominated usage of mobile phones, wearable devices and autonomous vehicles are examples of distributed networks which generate huge amount of data each and every day. The computational power of these devices have also seen steady progression which has created the need to transmit information, store data locally and drive network computations towards edge devices. Intrusion detection systems (IDS) play a significant role in ensuring security and privacy of such devices. Machine Learning (ML) and Deep Learning (DL) with Intrusion Detection Systems have gained great momentum due to their achievement of high classification accuracy. However the privacy and security aspects potentially gets jeopardized due to the need of storing and communicating data to centralized server. On the contrary, Federated Learning (FL) fits in appropriately as a privacy-preserving decentralized learning technique that does not transfer data but trains models locally and transfers the parameters to the centralized server. The present paper aims to present an extensive and exhaustive review on the use of FL in intrusion detection system. In order to establish the need for FL, various types of IDS, relevant ML approaches and its associated issues are discussed. The paper presents detailed overview of the implementation of FL in various aspects of anomaly detection. The allied challenges of FL implementations are also identified which provides idea on the scope of future direction of research. The paper finally presents the plausible solutions associated with the identified challenges in FL based intrusion detection system implementation acting as a baseline for prospective research.