I am developing a windows phone 7.1 application can anyone suggest me a good device(buy a new one) to test my application.
I would recommend looking for an unlocked device from the first generation of phones (e.g. Samsung Focus, HTC HD7, etc.). You can find them for cheap on E-bay. I like the Focus because it's a smaller phone and will give you a good impression of how your app will function on smaller devices. Also, if you're considering enabling your app on low-memory devices, then you should buy one of those like the Focus-Flash.
The cheapest(though the quality is good) device available running 7.5 tango is Nokia Lumia 610 which shall be good enough for testing purposes. Or you can go for Nokia Lumia 710. The only difference between them is that 710 has a 1.4 GHz processor whereas 610 has 1 GHz. The 710 device to my knowledge has the best processor featuring Windows Phone OS along with Lumia 800 (which one's a bit more expensive).