We do a careful investigation of the prospects of dark energy (DE) interacting with cold dark matter (CDM) in alleviating the S8 clustering tension. To this end, we consider various well-known parametrizations of the DE equation of state (EoS), and consider perturbations in both the dark sectors, along with an interaction term. Moreover, we perform a separate study for the phantom and non-phantom regimes. Using CMB, BAO and SNIa datasets, constraints on the model parameters for each case have been obtained and a generic reduction in the H0 − σ8, 0 correlation has been observed, both for constant and dynamical DE EoS. This reduction, coupled with a significant negative correlation between the interaction term and σ8, 0, contributes to easing the clustering tension by lowering σ8, 0 to somewhere in between the early CMB and late-time clustering measurements for the phantom regime, for almost all the models under consideration. Additionally, this is achieved without exacerbating the Hubble tension. In this regard, the interacting CPL and JBP models perform the best in relaxing the S8 tension to <1σ. However, for the non-phantom regime the σ8, 0 tension tends to have worsened, which reassures the merits of phantom dark energy from latest data. We further investigate the role of RSD datasets and find an overall reduction in tension, with a σ8, 0 value relatively closer to the CMB value. We finally check if further extensions of this scenario, like the inclusion of the sound speed of dark energy and warm dark matter interacting with DE, can have some effects.