I got a new LED TV which was bundled with a home theater system. I can connect my laptop to TV using HDMI and also play blu ray movies from USB port.
However the TV can only output audio, using DIGITAL AUDIO OUT.
The home theater is quite an old model and doesnt have these new ports. The home theater can accept input either as
Composite RCA Cables (Red/White) or 3.5mm AUX cables.
So i wanted to know how can i output audio from TV into the home theater system.
The schematic of ports are shown in the link below. http://i1133.photobucket.com/albums/m587/Sgvaibhav/Config/Configs-Copy2.png
Are any converts available that convert Digital audio out to composite RCA (Red/White)? If there is any other way to connect both the devices, please let me know.
Digital audio out, CAN be converted to RCA (red / white) by the use of what is called a 'DAC'. Digital to Audio Convertor. This is an aftermarket item costing at the least a couple hundred dollars with apparently no upper limit!
"But the TV can play blu ray movies (1080p), whilst the receiver cannot.
I really love watching movies at 1080p, but i also want sound from home theater."
Fine, connect the video out of your source directly to the TV to get a picture. Connect the audio output - whether analog or digital, depending on which your receiver handles - to the receiver to get multi-channel audio. You can run separate lines for audio and video and one has no influence on the other.
"I also connect my laptop to TV using HDMI. There is no way to connect audio to receiver from laptop."
Is there a definite need to send signals through a HDMI connection? For the most part HDMI does little other than cut down on the number of cables you'll need to make a video/audio connection. Component video provides the same signal to the TV while any source player you buy should be able to accomodate a receiver lacking the number or the features of the "latest and greatest" new receiver. You probably have a sound card that outputs either digital or analog audio from the computer. Run that to your receiver to get audio. If you insist on running HDMI you have two choces; you can either buy a converter to add the audio connections or you can buy a receiver that provides HDMI. Why do you think HDMI was invented? To get you to buy new equipment is the very simple reason. When your old receiver runs out of those new fangled connectors and features, you go buy a new receiver. That's the way the HT receiver market works. Sooner or later you'll have to buy into their scheme for keeping their business alive or just sit in the dark listening to nothing.
"So the ultimate solution is to send the sound from TV to home theater, which i want to know how to do so."
Not quite, the ultimate solution is to get video to the TV and audio to the receiver.
How you do so is described in this post. If you prefer to be stubborn and say you can only use the connectors provided by your two existing components, then that answer is also provided. You either think beyond the cables you have in your hand or you go buy a new receiver. That's the way the industry works.
"what about a connection from the headphone out to the portable in? both require 3.5mm jacks (an AUX cable can be used)."
Look at the connector. It is a two channel connector which can only provide two channels of audio. If you don't want multi-channel sound, that will work - though it's not the best option. The best options have been provided above.
Going back to your op ...
"I got a new LED TV which was bundled with a home theater system."
Either this is a very poor "bundle" or the bundler meant for you to use something other than the connectors you describe. Why not call the retailer and; 1) either complain about the lack of knowledge displayed by bundling incompatible components - and mention no one said this was a problem with this bundle, or 2) they'll explain how you get the connections made. I suspect it will be very much as I have described above.