One of the tools I am using uses encryption/decryption to send out data over the network. I am modifying the tool and I need to be sure that the data is actually being sent in an encrypted form.
Are Wireshark and tcpdump the right tools for the purpose? At which point during the transfer do they capture the network packets?
Both of those tools capture the data exactly as it goes out over the wire. (Think of it as sort of the equivalent of "tee" for output that's going to screen as well as to file; here too, the same data goes to the socket as well as to tcpdump or whatever.)
So yes, if your tool is configured correctly to encrypt the data before sending it, then tcpdump or Wireshark should reflect that in their packet captures.
Yes, those are the right tools. Wireshark will identify TLS and SSL packets, if that's what you are using for encryption. You can provide Wireshark with the server's private key and decrypt the traffic if necessary (except for ephemeral modes like DHE and ECDHE).