Permalinks is not working in my wordpress setup

Thanks to @rofflox and @toscho for giving me the link.
web.config file was not created as i was working on localhost as WAMP i.e Apache and it required when i shifted to production as it was running IIS.

So i created a blank web.config file and added the following content.

<rewrite>
    <rules>
        <rule name="Main Rule" stopProcessing="true">
            <match url=".*" />
            <conditions logicalGrouping="MatchAll">
                <add input="{REQUEST_FILENAME}" matchType="IsFile" negate="true" />
                <add input="{REQUEST_FILENAME}" matchType="IsDirectory" negate="true" />
            </conditions>
            <action type="Rewrite" url="index.php" />
        </rule>
    </rules>
</rewrite>

This helped me to accept permalinks perfectly.