Not yet reviewed by Pith; the record is open.

We do a careful investigation of the prospects of dark energy (DE) interacting with cold dark matter in alleviating the $S_8$ 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 cosmic microwave background (CMB), baryon acoustic oscillations, and Type Ia supernovae data sets, constraints on the model parameters for each case have been obtained and a generic reduction in the $H_0-\sigma_{8,0}$ correlation has been observed, both for constant and dynamical DE EoS. This reduction, coupled with a significant negative correlation between the interaction term and $\sigma_{8,0}$, contributes to easing the clustering tension by lowering $\sigma_{8,0}$ 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 Chevallier-Polarski-Linder and Jassal-Bagla-Padmanabhan models perform the best in relaxing the $S_8$ tension to $<1\sigma$. However, for the non-phantom regime the $\sigma_{8,0}$ tension tends to have worsened, which reassures the merits of phantom DE from latest data. We further investigate the role of redshift space distortion data sets and find an overall reduction in tension, with a $\sigma_{8,0}$ value relatively closer to the CMB value. We finally check whether further extensions of this scenario, such as the inclusion of the sound speed of DE and warm dark matter interacting with DE, can have some effects.