LHS = number of pairs of squares on an n×n grid of squares
I have tried conditioning on the diagonals to enumerate the RHS but nothing I have tried results in a disjoint exhaustive enumeration.
Another method I have attempted is to consider selecting columns and rows and picking two of their intersections in some prescribed method but nothing I have come up with works.
As you mentioned LHS is the number of ways to pick two coordinate elements in an $n\times n$ matrix. Now, you can do this in three ways: