7.1 system with a budget of 5 lakhs

[yrk1969]

6 lakhs for AV equipment.
1 -1.5 lakh for automation
Seating & furnishing - max. 10 lakhs

Out of the AV equipment, I wanted to allocate 1.5 lakh for video and the rest for Audio. Is this a good decision or do people generally spend the same amount on audio & video?

I have no experience in building/budgeting home theaters, but with that budget I wouldn't go for an entry level projectors like HD20/HD22. Look at something like an epson 8100 at least, you will get better quality as well as placement flexibility.