I got it and it was so simple, thank you.
I did this:
1. Check Mod_rewrite is enabled or not(as @travel-junkie has pointed). If you are on wamp 2.0, you can left click on the wamp icon(in the quick taskbar, the half cirecle icon)->Slect Apache(from the menu)->Apache Modules->rewrite_module(If it is not having a tick, click over that). Refresh the wordpress page and check is it working or not.
2.Once mod rewrite is checked you can try enabling/disabling permalink and resave it and Most probably it is going to work.
