EDIT EDIT EDIT :
Desiibond posted a better alternative, but here goes anyway
Do what I am about to do in a month
Retaining the case, monitor , keyboard, mouse etc from the older PC...
Prices as quoted by desiibond in this post
processor: that is a good choice. price: 3k - 3.5k
mobo: pick Gigabyte MA78GM-US2H or ASUS M3A78-EM instead. 760G is not a good chipset if you are going to use onboard graphics .Price: 4k-4.5k
HDD: go for Western Digital green or blue 500Gb : 2.5k
PowerSupply: I would pick Corsair VX450W : 4.2k
Now having the above config, the sum total is like
Processor and Motherboard
AMD Athlon II X2 240 (2.8GHz)
ASUS M3A78-EM
8000 for the processor and mobo at most... prices can drop, who knows.
Hard-drive
Western Digital Green or Blue 500Gb
2500 for the HDD
I don't think your friend's current system has a SATA HDD, if it is then he could do with the one he has
Memory
Since you mentioned that his current system has a gig of DDR2 RAM , (although you didnt mention the brand) that would do fine on this mobo as well.
Note: its better if its a transcend, corsair or kingston RAM modules and not the other local like ram modules which can cause system crashes.
Power Supply : (IMPORTANT)
Most of the times people dont realise the significance of a power supply which , if fauty can kill off the entire system. Dont take the needless risk. Its better to go broke a bit and buy a decent, guaranteed power supply than one whose performance is not guaranteed.
Just cause the PSU might say 500W doesnt mean its giving 500W ... also the PF capability is important in ensuring a clean power.
Why I am stressing on this fact because people tend to have boards from ASUS, good disks , and ram but the power supply is like usually the one bundled with the cabinet (not at all a good thing unless its like an antec case which comes with its own certified power supply)
okay listing the PSU's
Corsair VX450W : 4200
if 4.2k is too much then he could opt for a lower wattage PSU or go for brands like
coolermaster (which isnt the best, but at least good and reliable enough)
Note: If you opt for a 450W PSU like the corsair,
it offers future upgradibility when you add in a GPU or addition harddrives which will shoot up the power consumption. And PSU's can always be carried forward if there's another upgrade.
Going in for a good PSU is a long term investment.
Coolermaster PSU's cost like 2k upwards I believe. here's two which I saw at ITware
CoolerMaster RRS390-PMSRA3 Extreme Power 390W
Rs 1850/-
CoolerMaster RS460-PCARA3 Extreme Power 460W
Rs2425/-
Don't go for the likes of Zebronics really. Even though its a "known" company here.
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Total is like
8000 + 2.5k + 2-4k = 12500-14500 INR.
If you also have to add RAM then add 2.5k more for Corsair DDR2 Ram (2GBx1 )
Min expenditure = 11500-12500 (PSU is like from coolermaster, and pricing of mobo + cpu isnt that high .. )
Mid expenditure(1) = 14500 (PSU Corsair 450W )
Mid expenditure(2)= 14500( Corsair DDR2 RAM , Coolermaster PSU)
Max expenditure = 17000. (Corsair 450W + Corsair RAM DDR2 )
Which includes:
Processor, Mobo, HDD, PSU and (Ram optional)
Stuff to be carried from the original PC
Monitor, Memory, Optical Drives, Keyboard, Mouse, Speakers, Case, UPS etc.
hope this helps