Mott insulators with strong spin-orbit coupling have been proposed to host unconventional magnetic states, including the Kitaev quantum spin liquid. The 4$d$ system $alpha$-RuCl$_3$ has recently come into view as a candidate Kitaev system, with evidence for unusual spin excitations in magnetic scattering experiments. We apply a combination of optical spectroscopy and Raman scattering to study the electronic structure of this material. Our measurements reveal a series of orbital excitations involving localized total angular momentum states of the Ru ion, implying that strong spin-orbit coupling and electron-electron interactions coexist in this material. Analysis of these features allows us to estimate the spin-orbit coupling strength, as well as other parameters describing the local electronic structure, revealing a well-defined hierarchy of energy scales within the Ru $d$ states. By comparing our experimental results with density functional theory calculations, we also clarify the overall features of the optical response. Our results demonstrate that $alpha$-RuCl$_3$ is an ideal material system to study spin-orbit coupled magnetism on the honeycomb lattice.
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