The Inciting Incident is the first of the 6 Elements of Story.  It is the kickoff of your story, and depending on what your genre is, could come in the first sentence, the middle of the first act, or even the last sentence of the first act.  Rarely is the inciting incident placed farther than the first act though.

Why?

Well, unless you're an amazing storyteller, few people are going to want to read half a book of world set-up. 

So generally, plan to have your inciting incident somewhere in your first act (the first 25% of your story).

"The INCITING INCIDENT radically upsets the balance of forces in the protagonist's life," Robert Mckee, STORY.

Whatever your inciting incident is, your MC, or MCs, must react to it.

The inciting incident can occur as either a CAUSE or COINCIDENCE.

An example of a cause would be the inciting incident of Pride and Prejudice. 

In Pride and Prejudice, the inciting incident is a young man of "good fortune" has bought a neighboring house.

Right away we know two things from this inciting incident:

1. This story is going to be in the romance genre.

2. This story is going to end with one of the 5 girls getting married to this young man. 

The lives of the whole Bennett family are thrown upside down by the simple act of a new neighbor moving in.

This action is CAUSAL - intentional action by a character in the story.

While this may seem like a fairly mundane inciting incident, it's perfectly reasonable for a story about love.  Most things which change our lives seem at first mundane.  If this was a horror story, it might turn out the new neighbor is a serial killer.  Or maybe it's a long-lost sister bent on revenge if it's a psychological thriller/mystery. 

If it's an action story, the inciting incident may be an explosion; A superhero story, the incident leading to the acquisition of powers; A man v. nature adventure story, the onset of major climate change, or a violent storm approaching. 

These last two examples are COINCIDENTAL inciting incidents.  There is no "action" by a character which causes anything. 

Whatever it is, it needs to kick off the story in a compelling and dynamic way (which creates conflict), appropriate for the story's genre, and be pretty early in the novel. 

Here is one option for where it could be placed in a global  story act structure:

THE INCITING INCIDENT IN SCENE AND SEQUENCE

I said before that these 6 Elements of Story are repetitive building blocks, and thus need to also exist in every scene and sequence, chapter and act. 

In this regard, certain elements do double, triple, or even quadruple duty.

The inciting incident in Pride and Prejudice's global story, is also the inciting incident for the first scene, chapter, sequence, and act.  Act 1 of P&P ends with all hopes of Jane marrying Mr. Bingly being dashed when he leaves for London, presumably never to return.  A fitting transition to Act 2, and a surprising, but inevitable resolution to the inciting incident of Act 1.

Each scene which acts as a sequence, act, or global progressive complication (which will be discussed in the next chapter) must have an inciting incident. 

Your main characters will also have their own inciting incidents. 

Elizabeth Bennett's inciting incident in Pride & Prejudice is actually the night of the ball where she meets Mr. Darcy and he insults her.  It kicks off their relationship, leads her immediately to dislike him, and ultimately at the mid-point of the novel to refuse his offer of marriage.  Interestingly, this moment is also the climax of that scene.  So you can see that these Elements can have multiple relationships in a story. 

A climax of one scene may be the inciting incident of the next sequence or act.  The Global climax might be the inciting incident of the third act of the story, where the second act has been ended in a cliffhanger.

This is all to say that there are many different ways to construct your story, and you do not have to have a separate beat or scene for every single different part.  The best stories layer these elements to create an onion of story structure.

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If you have questions, please don't hesitate to ask. I'm going to do some Q/A chapters later on so if you've got a particular area you want help on or more information please let me know and I'll make sure to address it in a later chapter.

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