What version are you on and can you show a screenshot of your settings? This might be because you used auto retrieve password from amazon which requires a new permission.

Attaching the screenshot of the ec2 slave setting. Do you know which permission is required? 

Though I can see the instance getting launched on aws account.

You need to check specify password and specify your admin password or give getpassworddata to your appropriate role

I'm running Jenkins 2.476.3 version. Using latest ec2 plugin.

Do you know which permission needs to be added?

I have given the permission to retrieve the password. Now, I'm not getting the above exception. But instance/slave node is getting terminated with the below exception
ERROR: Unable to decode password:
java.lang.IllegalArgumentException: Illegal base64 character d
com.amazonaws.AmazonClientException: Unable to decode password:
java.lang.IllegalArgumentException: Illegal base64 character d
at hudson.plugins.ec2.EC2PrivateKey.decryptWindowsPassword(EC2PrivateKey.java:141)
at hudson.plugins.ec2.win.EC2WindowsLauncher.connectToWinRM(EC2WindowsLauncher.java:156)
at hudson.plugins.ec2.win.EC2WindowsLauncher.launchScript(EC2WindowsLauncher.java:39)
at hudson.plugins.ec2.EC2ComputerLauncher.launch(EC2ComputerLauncher.java:48)
at hudson.slaves.SlaveComputer$1.call(SlaveComputer.java:294)
at jenkins.util.ContextResettingExecutorService$2.call(ContextResettingExecutorService.java:46)
at jenkins.security.ImpersonatingExecutorService$2.call(ImpersonatingExecutorService.java:71)
at java.util.concurrent.FutureTask.run(FutureTask.java:266)
at java.util.concurrent.ThreadPoolExecutor.runWorker(ThreadPoolExecutor.java:1149)
at java.util.concurrent.ThreadPoolExecutor$Worker.run(ThreadPoolExecutor.java:624)
at java.lang.Thread.run(Thread.java:748)

I think it is related to newline characters returned in the PasswordData property from "getPasswordData" api call.
I tried to replicate on my local machine with standalone application. With newline characters, it is giving me below exception,

Exception in thread "main" org.bouncycastle.util.encoders.DecoderException: unable to decode base64 string: invalid characters encountered in base64 dataException in thread "main" org.bouncycastle.util.encoders.DecoderException: unable to decode base64 string: invalid characters encountered in base64 data at org.bouncycastle.util.encoders.Base64.decode(Unknown Source) at com.telushealth.thcp.pipeline.gradle.aws.ec2.AwsEC2GetPasswordTest.decryptWindowsPassword(AwsEC2GetPasswordTest.java:51) at com.telushealth.thcp.pipeline.gradle.aws.ec2.AwsEC2GetPasswordTest.main(AwsEC2GetPasswordTest.java:19)Caused by: java.io.IOException: invalid characters encountered in base64 data at org.bouncycastle.util.encoders.Base64Encoder.decode(Unknown Source) ... 3 more

Hi raihaan
As per your comment in JENKINS-58193 ,

I can see the getPasswordData cli returning \r\n prefixing the content.

I haven't set any password in the ami. I'm just running below script in the userdata,

<powershell>

1. Disable Credssp for Jenkins master to login via WinRM.
   winrm set winrm/config/service/auth '@{CredSSP="false"}'

$osString = wmic os get caption | Out-String
echo "Windows OS: $osString"
</powershell>