The depth of your sill and your desired frame choice will drive the process. Do you want a "Z" frame or do you need an outside mount frame to accommodate the opening? Additionally, will a build-out strip be required behind the frame to provide the needed clearance.
The best way to help you visualize this is with a diagram. As such, the diagram below shows three possible configurations and the clearance required depending on the louver size chosen. Please note, the type of tilt rod chosen also affects this consideration, as on many shutters the hidden tilt rod will require an additional 1/2" of clearance.