Steganography is a technique to be used for hiding communication. It embeds secret data in to unexceptional cover medium. Reversible data hiding (RDH) significantly considered as data hiding algorithm. From this, anyone can inbuilt the data into audio signal, image or video. Commonly two methods are available to hide the data on the image one is for reserving room after encryption and reserving room before encryption. This paper describes about reserving room before encryption to reduce the errors, which are possible in decryption phase. Subsequently it embed the data into gray scale image by bit plane processing algorithm and also embed data into color image by using histogram modification technique and shifting. If in the case of color image, image is splits into three channels such as red, green and blue. Then each channel image separated into three rows and three columns matrices. The matrices are individually processed in such a way that the matrix transformed to a row vector. The difference between pixel values of the particular channel establish and using histogram modification binary bits carrying secret message to embedded on the color image. Normally histogram modification is done to avoid underflow and overflow problems. Major the important issue in this process is compression employed on the image may affect the data hidden. To avoid this, the reserving room before encryption is employed and lossless compression technique is engaged on region of interest where data is hidden and lossy compression is applied to other portions in the image.