As long as it's conspicuous and doesn't require disassembly. Letters at least 1/16" tall and .003" deep.
Some put it under the charging handle (pull back to reveal). TROS puts it on the left rear strut I think. I put it right between the rail mounting holes. That way, I can cover it with a rail if I feel like it (It should be ok because plenty of other gun accessories cover serials and markings).
I'm also having mine engraved this weekend. I'm curious if anyone has had success engraving at the flat location which is covered up by a magazine when inserted? The other preferred location for me will be the small square below the serial number as shown by Buffman above.
Also, what are people using to blacken the engraving lettering afterwards? Aluminium Black or something else?