When I toggle on the install via USB in developer mode:
In MIUI 8.5 it gives the error like you mention while enabling "install via USB", to resolve the error you need to make WIFI off and make mobile data on and then enable the option “Install via USB”. it will work for you.
A detailed blog: http://sforsuresh.in/xiaomi-mi-note-4-install-via-usb-device-temporarily-restricted/