Thaksin lives abroad to escape a jail term for corruption, but a cabinet meeting last week reportedly endorsed a royal pardon that could allow him to return without serving time, prompting an angry response from his rivals.
"(Thaksin) will not receive any benefit," from this year's royal pardon, Justice Minister Pracha Promnok told reporters late Sunday.
Royal pardons, which usually exclude convicts found guilty of drug offences and corruption and those who have not spent time in prison, are granted each year on King Bhumibol Adulyadej's birthday on December 5.
Local media reported last week that this year's decree -- which needs to be approved by the king -- would be expanded to apply to "convicts who are at least 60 years old and are sentenced to under three years in jail".
Thaksin, who was ousted by the army in a 2006 coup, is 62 and lives in self-imposed exile in Dubai to avoid a two-year sentence for graft.
His potential pardon had threatened to inflame existing tensions in Thailand, with rallies both for and against the decree held in recent days.
The anti-Thaksin "Yellow Shirt" movement cancelled a planned demonstration in the capital Monday "after the justice minister said the royal pardon will stick with the (standard) conditions," spokesman Parnthep Pourpongpan told AFP.
Reports of the pardon came at a delicate time for Prime Minister Yingluck Shinawatra, who is Thaksin's younger sister and widely considered his political proxy, as she faces criticism for her handling of devastating floods.
Thaksin himself played down suggestions that he would get special treatment from his government allies in a letter to his fellow Thais sent on Sunday.
"I trust in the principle that the government will not do anything that will benefit me or any individual specifically," he wrote.
Thaksin said any action now taken should be "to bring national reconciliation to our country and to overcome the crisis" of Thailand's floods, which have killed more than 600 people.