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Bonds are generally issued for a fixed period, at a fixed (nominal) value, are repayable on a fixed date (the maturity date), and pay a fixed rate of interest (although they can carry a floating rate) during that period. When you buy bonds, you're lending the bond issuer money in return for a fixed rate of return. Bonds are therefore known as fixed-income investments, and you are a creditor of the company. Stocks, on the other hand, go up and down in value depending on the stock market, and you are an owner of the company.
Bonds can be issued by corporations, states, cities, and the federal government. Bonds issued by the federal government are extremely safe. Corporate bonds and municipal bonds, issued by states and cities, can be safe or high-risk. Just because a bond is issued by a city or state doesn't guarantee their safety. Bonds with a high yield (interest rate) are considered "junk bonds."
Since you lock-in your interest rate when you buy bonds, one of the risks of owning bonds is that you could be stuck with a lower interest rate while interest rates in the market are rising.
Tax-saving bonds are designed to partially or fully release a bond holder from the burden of taxes. The tax-saving bonds in India are issued by the Reserve bank of India, the nationalized banks, and certain private sector banks also.
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