A 16GB iOS device is going to have almost no space at all in order to update at this point unless you have virtually nothing on your phone at all. You need to remove more content in order to update. The OTA file could be a few GB in size.
I read your post in the iTunes for Windows forum. I will address those points here.
iCloud storage has nothing to do with the physical storage on your phone. You cannot add to the storage on the phone itself and that’s where you need the space for the update.
What's the difference between device storage and iCloud storage? - Apple Support
You said that most of your storage is being taken up with “other” data. The fix for that was supposed to be updating to iOS 13.6.1.
Clear Other storage on your iPhone or iPad - Apple Support
You don’t have the space in order to update and yes, the current version is 14.0.1 and you would only have the option to update to the latest version of iOS.
If you want to update, you need to clear the bloated other data from your phone. Your best bet would be to backup, restore to factory settings and the restore the backup. Since you are running iTunes on your PC, I recommend using that to backup, restore and then restore the backup.
How to back up your iPhone, iPad, and iPod touch - Apple Support
Restore your iPhone, iPad, or iPod to factory settings - Apple Support
