Available internal storage

When you download an app from the Play store, you are getting the .apk file, which is an archive file (like a zip file). If you have a 500mb app, it will require 500mb to download the .apk and then a further 500mb+ to extract and install. There will be a temporary period, during installation where you need a total of 500+500mb, 1,000mb to get the app installed. After installation is complete, the .apk archive is deleted, and you will again have 500mb free. Try moving some data off your phone, onto your workstation, so you have plenty of space, then install the app. Once it is installed, and the apk deleted, move the data back from your workstation.

Play Store suggests having 500mb of free space for your phone to work properly. So when have low on storage you can't install large apps even through apks.