Good question. If you're buying a curtain in a fixed length, that may determine the position of the rod.
You'll want to begin by measuring the length of the curtain you're going to use. If you intend it to block out light, it should hang some inches past the line of the window sill. Once you determine where you want the bottom of the curtain, measure up to locate the proper position for your rod above the window.
If the curtain is long enough to allow for optional positioning of the rod, I'd set it 6-12" above the window. Your decision may be influenced by the position of any other curtain rods in the room, if any.
When installing the rod brackets, it's best to secure them to a wall stud or the window header so that they don't come loose or pull out over time. If there aren't any wood members where you need to install the brackets, insert a wall anchor or Molly bolt into the drywall or plaster first. Then install the bracket screws into the anchors.
Good luck with the project.