So, possessives, If we use वह on its own it can mean That/He/She, but only when combined with boy/girl/man/woman does it become a definite person?
Exactly! वह एक लड़का है (He/That is a boy) vs वह लड़का सेब खाता है (That boy eats an apple).
This exercise, with choices and no tooltips, might be too hard for this stage. I cannot even spell these words. The transition from letters to small phrases misses ... the words themselves.
There is Present Continues in Hindi and it looks differently. This sentence is in Present Simple.
Woh ladka paani pee raha hain will be the translation for your sentence. Hindi, unlike French, for instance, has separate tense structures for simple present, and present continuous.