First of all, you need to create a .ico file and then upload it to your store root directory [Admin control panel > Media Basket - Files > upload to / ]
After that, place this code in any border's extra HTML section:
example: <link rel="shortcut icon" href="favicon.ico">
You may try out this website. It's a free favicon generator (generates .ico file)
UPDATE May 11, 2017
1.Create a 32x32 or 16x16 .ico or .png file and name the file 'favicon.ico' or 'favicon.png'. Try to keep the file size below 5KB.
2. Upload your favicon file to your store root directory [Admin control panel > Media Basket - Files > upload to root "/" and NOT to /files ]
3. The favicon will appear on your site automatically within the next few minutes.
Here is a list of sites to convert image files to .ico: