How do I know that they are reading or they are studying?
You don't. Without any context (such as a book), both should be accepted. Report it if it is marked wrong.
Six students read should be okay right?
Without context, I can answer "six students reading," as much as I have to put "six students ARE reading!"
You have to translate the present tense prefix "-na-", so it's either "read" or "are reading". (Just "reading" won't do it.)
correct! the Swahili sentence is complete, so you don't need context