I signed up for Amazon free usage tier where i get a micro instance free for a year. If i terminate the free instance and start a new micro instance, will i be charged for the new instance or will it be free?
You get 750 free hours of Linux micro instance time per month for one year after signing up for your AWS account.
It's up to you how you use it: you can run one instance for the whole year, or you can run multiple instances for shorter periods. It's completely OK to stop and start instances.
See http://aws.amazon.com/free/ for details.