Relocation allowance is taxed higher than normal salary that I know, ie in my case 22.8% vs 15.8% withholding tax.
My employer merged 2 parts in the last payment slip and taxed everything under 22.8%, which means I've lost quite an amount in net terms. Is this correct from tax and legal perspective? Or should these 2 parts always be taxed separately?
It's taxed as income. You're on tax at source. You go into a different tax bracket every time your monthly income changes.
If you earn above 120k, then you'll fill in a tax return and it'll all be evened out. Otherwise you can ask for one. But you may find that you pay more tax overall even so.
When I first came here, me and my team got bonuses. Some of those who took them in cash instead of shares, ended up with very small pay packets!