Digital clock by atmega8 with timer1 and LCD display
You reset the second counter before making the division with 60 to count the minutes. So you always add 0.

if(second==60)
{
    second=0;
}

minute=minute+(second/60);  // &lt;---- This line always adds 0 because you reset the seconds before.


Replace the minute increment before the if statement like this:

minute=minute+(second/60);  // &lt;---- Increment minutes if necessary, then reset the seconds

if(second==60)
{
    second=0;
}


Also declare your counters as volatile to make sure that they won't be optimized.

volatile unsigned int second=0;
volatile unsigned int minute=0;