For years, Indian investors have faced a simple problem—premium stocks are too expensive. Imagine wanting to own a share of MRF, which often trades above ₹1 lakh, or Page Industries at over ₹40,000. For small investors, these prices put ownership out of reach.
Globally, this barrier has been solved by fractional shares, where you can buy a fraction of a share instead of a whole unit. But in India, the legal framework has not yet fully allowed it—until now. With SEBI’s new sandbox trials and the Ministry of Corporate Affairs (MCA) consultations, fractional investing may soon become reality.
This blog explains what fractional shares are, how Indian regulations are evolving, and what rights investors will have once they’re introduced.
What Are Fractional Shares?
Fractional shares represent a portion of one share of a company. Instead of buying one full share, investors can own fractions—say 0.05 or 0.1 of a share—depending on how much they invest.
👉 Example: If a stock costs ₹10,000 and you invest ₹500, you’ll own 5% of that share.
Fractional shares are already common in countries like the United States, UK, and Europe, enabling millions of first-time investors to access expensive stocks like Amazon, Tesla, or Google with small amounts.
Rules Around Fractional Shares in India
Currently, fractional ownership of shares is not legally permitted in India. Here’s why:
- Companies Act, 2013 → Requires shares to be issued in whole units, not fractions.
- SEBI Regulations → Brokers are not allowed to hold shares as principals and distribute fractions.
- Depository System (NSDL & CDSL) → Designed to record ownership of whole shares, not parts.
Because of these restrictions, Indian investors have had no direct access to fractional shares—only workarounds like:
- International platforms (Vested, INDmoney) → Allow buying fractional US stocks.
- Fractional real estate or asset ownership → Already exists, but not for equities.
SEBI’s Sandbox & The New Developments
In 2025, SEBI approved a pilot for fractional shares in its innovation sandbox, allowing startups like Xaults to test new models.
The key difference from earlier rejected proposals:
- Custody-first approach → Fractions will be held at the depository level (NSDL/CDSL), not with brokers.
- Direct ownership for investors → Shares remain linked to investors’ demat accounts.
- Smart contract settlements → Potential use of blockchain for faster, transparent trade settlements.
This model directly addresses SEBI’s earlier concerns about security, custody, and fair treatment of investors.
Rights of Fractional Shareholders in India
One of the big questions investors ask is: What rights will I have if I only own a fraction of a share?
Once SEBI and MCA update the framework, fractional shareholders are expected to get:
- Proportional Dividends
If a company declares ₹100 per share as dividend and you own 0.1 share, you’ll receive ₹10. - Corporate Actions
- Bonus shares → Credited in fractions.
- Rights issues → Eligible based on your fractional ownership.
- Voting Rights
This is still under debate. In the US, many platforms do not extend direct voting rights to fractional holders, but SEBI may structure it differently if custody lies with the depository. - Ownership Security
Unlike pooled structures (where a trustee held shares), SEBI’s model ensures ownership sits directly with investors, reducing risks.
Taxation of Fractional Shares in India
As of now, tax rules for fractional shares are unclear. Experts suggest:
- Capital Gains Tax → Will apply proportionally when you sell your fractional holdings.
- Dividend Tax → Taxed as per slab rates, like regular shares.
The Income Tax Act will need amendments to clarify these treatments.
Global Comparison
| Country | Rules & Platforms | Investor Rights |
|---|---|---|
| US | Robinhood, Fidelity, Schwab → fractional shares allowed since 2019 | Dividends proportional; limited voting rights |
| UK/EU | Revolut, Trade Republic offer fractional investing | Similar to US |
| India | Not yet allowed (sandbox trials ongoing) | Likely dividends & bonus shares; voting rights TBD |
Challenges Ahead
For fractional shares to become a reality in India, several challenges need to be addressed:
- Legal amendments → Companies Act must allow fractions.
- Depository upgrades → NSDL & CDSL need systems to track fractional ownership.
- Broker frameworks → Compliance with SEBI rules restricting broker-held shares.
- Tax clarity → To avoid investor confusion and litigation.
Final Thoughts
Fractional shares could be India’s next big financial inclusion story, just like UPI revolutionized payments. By allowing investors to start with as little as ₹500, SEBI can open the stock market to millions who previously felt left out.
The coming months will be crucial as SEBI, MCA, and tax authorities work together to build a safe and transparent framework. For investors, this means one thing: get ready. Soon, you may be able to own a slice of India’s top companies—without breaking the bank.