This paper presents an effective compression technique for lossy compression of color images. After reducing the correlation among R, G and B planes using YCoCg-R transform, the Integer Wavelet Transform (IWT) is applied on each of the transformed planes independently up to a desired level. IWT decomposes the input image into an approximation and several detail subbands. Approximation subband is compressed losslessly using prediction errors and Huffman coding, while each of the detail subbands are compressed independently using an effective quantization and Huffman coding. To show the effectiveness of proposed scheme, it is compared with several existing schemes and a state of art for image compression JPEG2000 and it is observed that the proposed scheme outperforms over the existing techniques and JPEG2000 with less degradation in the quality of reconstructed images while achieving high compression performance.