Orthogonal time frequency space (OTFS) is a strong candidate waveform for sixth generation wireless communication networks (6G), which can effectively handle time varying wireless channels. In this paper, we analyze the effect of fractional delay in delay Doppler (DD) domain multiplexing techniques. We develop a vector-matrix input-output relationship for the DD domain data transmission system by incorporating the effective pulse shaping filter between the transmitter and receiver along with the channel. Using this input-output relationship, we analyze the effect of the pulse shaping filter on the channel estimation and BER performance in the presence of fractional delay and uncompensated fractional timing offset (TO). For the first time, we propose the use of time-frequency localized (TFL) pulse shaping for the OTFS waveform to overcome the interference due to fractional delays. We show that our proposed TFL-OTFS outperforms the widely used raised cosine pulse-shaped OTFS (RC-OTFS) in the presence of fractional delays. Additionally, TFL-OTFS also shows very high robustness against uncompensated fractional TO, compared to RC-OTFS.